SMM Morning Comment For SHFE Base Metals (September 27)

SHANGHAI, Sep 27 (SMM) –

Copper

China Announced Fiscal Stimulus Measures, Boosting Copper Prices [SMM Copper Morning Comment]

LME copper opened at $9,948.5/mt overnight, initially fluctuating rangebound before declining to a low of $9,945/mt. It then rose steadily, reaching a high of $10,090/mt near the close, and finally closed at $10,090/mt, up 2.95%. Trading volume reached 39,000 lots, and open interest was 288,000 lots. Overnight, the most-traded SHFE copper 2411 contract opened at 78,470 yuan/mt, initially dipping to 77,880 yuan/mt, then rising to a high of 78,960 yuan/mt during the session, and finally consolidating to close at 78,880 yuan/mt, up 1.91%. Trading volume was 81,000 lots, and open interest was 177,000 lots. Macro side, the US Q2 real GDP annualized rate final value recorded 3%, consistent with expectations and previous values. Initial jobless claims for the week ending September 21 were 218,000, below the expected 225,000, marking a new low since the week of May 18. US Fed Governor Cook expressed full support for last week's 50 basis point rate cut, and the US dollar index fluctuated downward, benefiting copper prices. Additionally, after easing monetary policy to boost the economy, China announced fiscal stimulus measures, leading to gains in global stock markets and boosting copper prices. Fundamentally, supply side, the widening SHFE copper Backwardation structure led to increased selling by traders, combined with a large influx of imported goods, increasing copper cathode spot supply and putting pressure on premiums. Demand side, with copper prices fluctuating at highs, new orders from downstream decreased, and some downstream sectors had already completed restocking, leading to sluggish spot market transactions. However, social inventory continued to fall. According to SMM, as of Thursday, September 26, SMM copper inventory in major regions nationwide decreased by 11,200 mt from Monday to 154,000 mt, and by 38,000 mt from last Thursday, marking the 12th consecutive week of destocking, with the destocking speed accelerating. Total inventory was 81,000 mt higher compared to 73,000 mt in the same period last year. Price side, with macro and fundamental resonance, copper prices are expected to fluctuate upward.

Aluminum

Overnight, LME aluminum surged over 3%. In the short term, SHFE aluminum may hover at highs. [SMM Aluminum Morning Comment]

Overnight, the most-traded SHFE aluminum 2411 contract opened at 20,295 yuan/mt, reaching a high of 20,345 yuan/mt and a low of 20,225 yuan/mt, closing at 20,315 yuan/mt, up 165 yuan/mt, a rise of 0.81%. LME aluminum opened the previous trading day at $2,535/mt, with a high of $2,622/mt and a low of $2,532/mt, closing at $2,621.5/mt, up $83/mt, a rise of 3.27%.

Summary: On the macro front, since the US Fed's rate cut, the domestic central bank announced four major monetary policies, including interest rate cuts, lowering the reserve requirement ratio, and reducing the mortgage rate on existing home loans, indicating the government's recognition of the urgency to eliminate deflation risks and support economic growth, creating a favorable macro resonance. On the fundamentals, the domestic aluminum market supply side slightly increased. With the National Day holiday approaching, considering the holiday production schedule of downstream sectors, there is an expectation of a temporary weakening in domestic downstream consumption. After the holiday, domestic aluminum social inventory may see a slight accumulation. However, from the medium and long-term downstream production schedule, October consumption remains in the industry peak season, with demand mainly stable. Overall, given the short-term favorable macro atmosphere and stable fundamentals, the aluminum market is expected to hover at highs in the short term.

Lead

Destocking and economic measures may drive lead prices upward [SMM Lead Morning Comment]

Overnight, LME lead opened at $2,097.5/mt. Benefiting from China's economic stimulus policy, LME lead showed a fluctuating upward trend throughout the day, peaking at $2,147.5/mt, the highest since July 19, 2024. By the close, the rise in LME lead slowed and LME lead closed at $2,137/mt, up 1.64%.

Overnight, the most-traded SHFE lead 2411 contract opened higher at 16,850 yuan/mt. With the release of domestic economic policies, non-ferrous metals generally strengthened. SHFE lead initially surged to 16,920 yuan/mt, a new high for the past half month. Subsequently, the rise in SHFE lead slightly retracted, and SHFE lead consolidated between 16,800-16,850 yuan/mt, finally closing at 16,795 yuan/mt, up 0.81%. The open interest was 46,057 lots, down 110 lots from the previous trading day.

Macro side, the Political Bureau of Central Committee of the Communist Party of China held a meeting to analyze the current economic situation and work. The meeting emphasized strengthening the counter-cyclical adjustment of fiscal and monetary policies, ensuring necessary fiscal expenditure and effectively securing the "three guarantees (Ensure basic livelihood, secure wages, maintain operations)" at the grassroots level. It aims to stabilize the real estate market, strictly control new construction, optimize existing stock, and improve quality, while increasing loans for "white list" projects and revitalizing idle land. Additionally, the PBoC implemented RRR cuts and interest rate cuts: from September 27, the reserve requirement ratio for financial institutions was lowered by 0.5 percentage points, and the 7-day reverse repo rate was reduced by 0.2 percentage points.

Fundamentally, before the National Day holiday, downstream enterprises' lead consumption expectations are gradually realized, leading to a significant drop in social inventory of lead ingots, supporting a fluctuating upward trend in lead prices. Recently, maintenance at some primary and secondary lead smelters has ended, and new capacity for lead ingot is about to be released. The expected increase in lead ingot production in October exceeds 30,000 mt. Coupled with the National Day holiday for downstream enterprises, there is a high risk of inventory accumulation in the lead ingot market after the holiday. Future attention should be paid to the resumption of primary and secondary lead enterprises and new capacity commissioning progress.

Zinc

Favorable macro policies boost market confidence; SHFE zinc fluctuates at highs [SMM Zinc Morning Comment]

SMM, Sep 27: Overnight, U.S. initial jobless claims fell to a four-month low; foreign media reported that the Israeli Prime Minister rejected a 21-day ceasefire proposal with Lebanon; OPEC+ is reportedly continuing its plan to increase production in December; Yellen stated that intervening in the dollar is conceivable in extreme cases; a major meeting was held by China's central government to analyze and study the current economic situation and economic work; China's central bank announced the need to accelerate the introduction of financial incremental policy measures; the first "central enterprise" long-term capital market entry document was released; regulators strengthened supervision of brokerage "stock recommendation software."

Overnight, LME zinc opened at $2,988/mt, initially fluctuating narrowly around the daily average line and dipping to $2,984/mt. In the afternoon, LME zinc rose above the daily average line, reaching a high of $3,106/mt, and ended with a narrow fluctuation around $3,095/mt, closing up at $3,094/mt, an increase of $105.5/mt, or 3.53%. Trading volume increased to 112,000 lots, and open interest decreased by 1,242 lots to 241,000 lots. Overnight, LME zinc recorded a large bullish candlestick, supported by various moving averages below. LME social inventory decreased by 175 mt to 255,050 mt, a reduction of 0.07%.

Currently, U.S. initial jobless claims have fallen to a four-month low, coupled with China's fiscal stimulus measures, it is expected that LME zinc will fluctuate upward today. Future attention can be paid to the U.S. August core PCE price index monthly rate and other data.

Overnight, the most-traded SHFE zinc 2411 contract opened with a gap at 24,970 yuan/mt, initially fluctuating around the daily average line with a range of 280 yuan/mt, dipping to 24,860 yuan/mt. Subsequently, bulls increased positions, pushing SHFE zinc to a high of 25,155 yuan/mt. By the end of the session, bulls reduced positions slightly, and it closed up at 25,025 yuan/mt, an increase of 315 yuan/mt, or 1.27%. Trading volume decreased to 135,000 lots, and open interest increased by 4,659 lots to 117,000 lots. Overnight, SHFE zinc recorded a four-day winning streak, with the daily K-line moving upward, supported by various moving averages below. Currently, favorable macro policies continue to boost market confidence, coupled with a slight decrease in social inventory, providing support for zinc prices. It is expected that SHFE zinc will continue to fluctuate at highs today.

Tin

SHFE tin prices fluctuated rangebound during the night session. Recent spot market transactions were active [SMM Tin Morning Brief].

SMM, September 27: In the night session yesterday, the most-traded SHFE tin contract closed at 257,510 yuan/mt, up 1,400 yuan/mt, an increase of 0.55%, with a high of 260,350 yuan/mt and a low of 256,320 yuan/mt. During the morning session yesterday, trading companies' quotes for domestic tin ingot brands showed little change compared to recent days. Small brand tin ingots were quoted at premiums of 0-500 yuan/mt against SHFE 2410 contract, delivery brand prices were 200-700 yuan/mt against SHFE 2410 contract, Yunnan Tin brand was quoted at 600-800 yuan/mt against SHFE 2410 contract, and imported tin brands' spot prices were 600-200 yuan/mt against SHFE 2410 contract. Tin prices fluctuated at low levels during the morning session yesterday, with some downstream and end-user companies actively restocking. Some trading companies transacted 20-30 mt, while others transacted 2-3 trucks. Overall, the spot market remained active yesterday.

Nickel

On September 26, Jinchuan nickel was quoted at a premium of 1,700-1,800 yuan/mt, with an average of 1,750 yuan/mt, up 50 yuan/mt from the previous trading day. Norilsk nickel was quoted at a discount of 300-200 yuan/mt, with an average of 250 yuan/mt, down 50 yuan/mt from the previous trading day. On the morning of September 26, the futures market fluctuated, and spot premiums widened compared to the previous working day. Nickel briquette prices were 127,550-127,750 yuan/mt, up 675 yuan/mt from the previous trading day. The price spread between nickel briquette and nickel sulphate was about 1,336 yuan/mt (nickel sulphate prices were 1,336 yuan/mt lower than nickel briquette prices).