SMM Morning Comment For SHFE Base Metals (Oct 14)

SHANGHAI, Oct 14 (SMM) –

Copper

Macro sentiment is bullish; copper prices fluctuate at highs [SMM Copper Morning Comment]

Last Friday evening, LME copper opened at $9,745.5/mt, initially declined to $9,716.5/mt, then fluctuated upward, reaching a high of $9,817/mt near the close, and finally settled at $9,803/mt, up 0.67%. Trading volume reached 16,000 lots, and open interest was 292,000 lots. Last Friday evening, the most-traded SHFE copper 2411 contract opened at 77,370 yuan/mt, initially dipped to 77,340 yuan/mt, then rose, reaching a high of 78,050 yuan/mt near the close, and finally settled at 78,020 yuan/mt, up 0.96%. Trading volume reached 33,000 lots, and open interest was 161,000 lots. Macro side, the US September PPI year-on-year rate was 1.8%, higher than the market expectation of 1.6%. The PPI data indicates a favorable inflation outlook, supporting the US Fed's expected interest rate cut next month, which is bullish for copper prices. Meanwhile, China's Ministry of Finance announced plans to introduce a series of targeted incremental policies soon to stabilize growth, expand domestic demand, and mitigate risks, which is expected to boost copper prices. Fundamentally, due to traders' pessimistic attitude towards future premiums, there is a noticeable sentiment to offload, leading to an increase in copper cathode spot supply. However, from the consumption side, copper prices remain high, with downstream sectors showing significant wait-and-see sentiment, resulting in mediocre overall transactions and some pressure on spot premiums/discounts. Additionally, according to SMM survey data, there will be a significant increase in imported copper inflows in mid-to-late October. Under this expectation, if copper prices continue to fluctuate at highs, the oversupply in the spot market will further persist. Price-wise, attention should be paid to the suppression of demand by high prices. Copper prices are expected to continue fluctuating at highs today, with limited upward potential.

Aluminum

Inflation data rebound supports US Fed interest rate cut expectations; macro sentiment boosts aluminum prices [SMM Aluminum Morning Meeting Summary]

SMM, Oct 14: Last Friday night, the most-traded SHFE aluminum 2411 contract opened with a gap at 20,940 yuan/mt, reaching a high of 20,990 yuan/mt and a low of 20,875 yuan/mt, closing at 20,955 yuan/mt, up 130 yuan/mt, a 0.62% increase. Last Friday, LME aluminum opened at $2,592/mt, with a high of $2,663/mt and a low of $2,588.5/mt, closing at $2,638/mt, up $47/mt, a 1.81% increase.

Summary: Macro front, September inflation data rebound supports the US Fed's interest rate cut expectations for next month. Domestically, the Ministry of Finance made a significant announcement, indicating substantial borrowing space and plans to introduce a package of incremental policies. Fundamentals side, the expectations for production cuts in Yunnan for Q4 have decreased, along with the release of some new and resumed capacity, leading to continued growth in domestic aluminum supply. Cost side, the spot alumina market remains in tight balance, making it difficult for domestic aluminum costs to decline. Demand side, downstream operations are generally stable, but feedback indicates weak demand growth, which may affect future operations. Overall, the aluminum market's supply-demand mismatch is not prominent, and with domestic and international positive factors and rising costs, short-term fluctuations are expected to be upward. Future attention should be paid to domestic consumption and changes in international macro sentiment.

Lead

Approaching delivery, inventory buildup of lead ingots weighs on lead prices; secondary lead costs may provide some support to lead prices [SMM Lead Morning Comment]

Last Friday, LME lead opened at $2,071/mt, briefly touched a low of $2,070/mt during the Asian session, and then rebounded. Due to a weaker US dollar index, base metals rose across the board during the European session, with LME lead fluctuating upward to a high of $2,100/mt, closing at $2,100/mt, up 1.25%.

Last Friday night, the most-traded SHFE lead 2411 contract opened at 16,805 yuan/mt, briefly touched a low of 16,760 yuan/mt at the beginning of the session, and was boosted by LME lead to a high of 16,980 yuan/mt, closing at 16,950 yuan/mt, up 1.83%.

Macro side, the US September PPI year-on-year rate recorded 1.8%, higher than the market expectation of 1.6%. China's Ministry of Finance announced four incremental policies, stating that other tools are under study. Additionally, on the 12th, Liu Shangxi, President of the Chinese Academy of Fiscal Sciences, discussed the reform of central-region fiscal relations: increasing the central fiscal expenditure ratio to at least 30%-40%.

Fundamentals, due to delivery factors, lead ingot inventory shifted from in-plant inventory to social warehouses, turning into visible inventory, putting pressure on lead prices. Meanwhile, limited supply of battery scrap means its price cannot follow the decline in lead prices, causing significant losses for smelters. The price inversion between secondary lead and primary lead provides some support to lead prices.

Zinc

Market sentiment continues; SHFE zinc rises [SMM Morning Comment Oct 14]

SMM, Oct 14: The US September PPI annual rate recorded 1.8%, with the previous value revised up to 1.9%. Israel narrowed its strike targets on Iran. The General Staff of the Korean People's Army issued combat readiness instructions. SpaceX completed its first "chopstick rocket" recovery test. Japan's stock market saw the largest weekly capital outflow in 20 years. The Ministry of Finance announced four incremental policies. The Shanghai Securities Regulatory Bureau warned against violating the red line on illegal reductions. China successfully recovered its first reusable returnable technology test satellite.

Last Friday, LME zinc opened at $3,096.5/mt. After opening, LME zinc fluctuated around the daily average line, dipped slightly to $3,081/mt at midday, then rebounded and rose all the way, peaking at $3,160/mt by the end of the session, closing up at $3,156/mt, an increase of $57/mt, or 1.84%. Trading volume decreased to 10,637 lots, and open interest increased by 1,473 lots to 262,000 lots. Last Friday, LME zinc recorded a bullish candlestick, with the 20-day moving average providing support below. LME zinc inventory decreased by 450 mt to 24,200 mt, a decline of 0.19%. The US Fed's September PPI data reinforced market expectations for an interest rate cut, and the US dollar index fell back from highs, boosting zinc prices to continue rising, with LME zinc's focus increasing.

Last Friday, the most-traded SHFE zinc 2411 contract opened at 25,450 yuan/mt. Initially, SHFE zinc dipped to 25,400 yuan/mt, then rose all the way, peaking at 25,780 yuan/mt by the end of the session, closing up at 25,760 yuan/mt, an increase of 410 yuan/mt, or 1.62%. Trading volume decreased to 76,617 lots, and open interest increased by 2,690 lots to 122,000 lots. Last Friday, SHFE zinc recorded a bullish candlestick, with the 5-day moving average providing support below. Driven by overseas market trends and improved domestic downstream zinc demand, SHFE zinc also rose.

Tin

Night session SHFE tin prices continued to rise; spot market transactions were weak [SMM Tin Morning News Oct 14]

SMM, October 14: Last Friday, the most-traded SHFE tin contract closed at 270,590 yuan/mt, up by 30,800 yuan/mt, an increase of 1.15%. During the early session last Friday, trading companies' quotations for domestic tin ingot brands showed little change compared to recent days. Small brand tin ingot quotations against the SHFE 2411 contract were +0~+200 yuan/mt, delivery brand quotations against the SHFE 2411 contract were +200~+600 yuan/mt, Yunnan tin brand quotations against the SHFE 2411 contract were +600~+800 yuan/mt, and imported tin brand spot quotations against the SHFE 2411 contract were -400~-200 yuan/mt. Last Friday morning, tin prices slightly dipped and then rebounded, with most downstream companies adopting a wait-and-see attitude. Most trading companies had scattered transactions, with a few trading companies transacting around one truckload. Overall, last Friday's spot market transactions were relatively quiet.

Nickel

SMM Nickel Market Morning Comment (Oct 14)

Last week, nickel prices fluctuated within a range, with macro factors continuing to exert influence. Macro side, post-holiday market sentiment remained strong due to policy benefits, but a downward trend has emerged. This caused SHFE nickel futures to mainly fluctuate between 132,000-135,000 yuan/mt during the week. Fundamentally, the market holds strong expectations for the October RKAB approval increase, and with the upcoming completion of the Indonesian government power transition in late October, there is a consensus on the expectation of marginal supply easing. On the other hand, there is high anticipation for the impact of fiscal policies expected to be introduced by the government in the fourth quarter to stimulate market demand. Although current spot market transactions are relatively sluggish, with some viewing it as strong expectations but weak reality, the optimism under strong policy support in the fourth quarter is expected to drive a new round of upward movement in futures, a view that still holds some recognition in the current market. In this context, SHFE nickel is expected to operate in the range of 130,000-136,000 yuan/mt this week.