SMM Morning Comment For SHFE Base Metals (Oct 15)

SHANGHAI, Oct 15 (SMM) –

Copper

US Dollar Index Continued to Rise, Copper Prices Were Under Pressure [SMM Copper Morning Comment]

LME copper opened at $9,697/mt overnight, initially fluctuated lower to $9,626/mt, and then surged to $9,734/mt before declining to close at $9,648/mt, down 1.58%. Trading volume reached 19,000 lots, and open interest was 291,000 lots. The most-traded SHFE copper 2411 contract opened at 77,010 yuan/mt, dipped to 76,710 yuan/mt, then rose to 77,330 yuan/mt, and finally closed at 77,090 yuan/mt, down 0.55%. Trading volume was 37,000 lots, and open interest was 157,000 lots. Macro side, data showed the US economy only moderately slowed, aligning with expectations for a modest interest rate cut. US Fed Governor Waller also indicated more caution on rate cuts compared to the September meeting. The US dollar index continued its rise, reaching a 10-week high, negatively impacting copper prices. Additionally, Israel stated it would avoid targeting Iranian energy and nuclear facilities, causing international oil prices to plummet, further dragging down copper prices. Fundamentally, concentrated arrivals of imported copper are expected to continue until late October, with a large influx into the domestic market. Coupled with the upcoming delivery period for the SHFE copper 2410 contract, traders' willingness to sell has significantly increased, boosting copper cathode spot supply and impacting premiums and discounts. On the consumption side, downstream consumption growth was limited due to copper prices. According to SMM survey data, as of Monday, October 14, SMM copper inventories in major regions nationwide increased by 17,000 mt to 221,000 mt compared to last Thursday, continuing to rise post-holiday. Total inventory was 106,000 mt higher than the same period last year at 114,000 mt. Price-wise, with the strong US dollar, copper prices lacked upward momentum and are expected to maintain a fluctuating trend today.

Aluminum

Post-holiday aluminum ingot continues destocking, with fewer arrivals tightening spot discounts [SMM Aluminum Morning Meeting Summary Oct 15]

SMM, Oct 15: Overnight, the most-traded SHFE aluminum 2411 contract opened at 20,780 yuan/mt, reaching a high of 20,815 yuan/mt and a low of 20,705 yuan/mt, closing at 20,800 yuan/mt, down 80 yuan/mt, a decrease of 0.38%. On Monday, LME aluminum opened at $2,600.5/mt, with a high of $2,604/mt and a low of $2,597/mt, closing at $2,604/mt, up $8/mt, an increase of 0.31%.

Summary: Macro front, Monday's data showed the US economy only moderately slowed, aligning with expectations for moderate interest rate cuts. US Fed Governor Waller stated that the Fed should be more cautious about rate cuts than at the September meeting, and the US dollar index rebounded. Domestically, on the 12th, the Ministry of Finance released a package of incremental policies, and the MIIT introduced more measures to boost consumption and expand domestic demand, helping enterprises explore markets and unleash vitality. Fundamentals side, expectations for production cuts in Yunnan in Q4 decreased, along with the release of some new and resumed capacity, leading to continued growth in the domestic aluminum market supply side. Cost side, the spot alumina market remains tightly balanced, making it difficult for domestic aluminum costs to fall. Demand side, downstream operating rates are generally stable, with inventories falling back to pre-holiday levels, and market circulation remains tight. Overall, the aluminum market's supply-demand mismatch is not prominent, and under the backdrop of domestic and international positives and rising costs, a short-term fluctuating trend is expected. Future attention should focus on domestic consumption conditions and changes in international macro sentiment.

Lead

Limited Improvement in Lead Consumption; Lead Ingot Inventory Yet to Deplete Quickly [SMM Lead Morning Comment]

Overnight, LME lead opened at $2,086/mt, briefly touching a high of $2,095.5/mt during the Asian session. As the US dollar index strengthened, base metals broadly declined in the European session, with bears increasing positions, causing LME lead to plunge to a low of $2,046/mt. It rebounded slightly at the close, ending at $2,072.5/mt, down 1.31%.

Overnight, the most-traded SHFE lead 2411 contract opened at 16,520 yuan/mt, briefly touching a high of 16,575 yuan/mt at the start of trading. It fluctuated around 16,520 yuan/mt at the close, ending at 16,510 yuan/mt, down 1.61%.

Macro side, US Fed Governor Waller stated that the Fed should be more cautious about interest rate cuts than at the September meeting. If inflation falls below 2%, which is unlikely, or if the labour market deteriorates, the Fed could cut interest rates earlier. If inflation unexpectedly rises, the Fed may pause rate cuts. The PBOC released data showing that the increase in social financing from January to September was 25.66 trillion yuan, 3.68 trillion yuan less than the same period last year. At the end of September, the broad money (M2) balance was 309.48 trillion yuan, up 6.8% YoY. In the first three quarters, RMB loans increased by 16 trillion yuan, with household loans up 1.94 trillion yuan.

Fundamentals, today is the delivery day for the SHFE lead 2410 contract, with holders gradually moving inventory to warehouses. Lead ingot inventory in social warehouses continued to rise. In October, many primary lead smelters were in a state of resumption, leading to a significant increase in lead ingot supply, while lead consumption improved only slightly, not enough to quickly deplete inventory. In the short term, there is still pressure for lead ingot social inventory to accumulate. Additionally, in mid-October, environmental protection inspections in Anhui may affect secondary lead smelters, potentially leading to temporary production cuts or halts. Overall, lead prices may continue to fluctuate rangebound in the short term.

Zinc

Zinc Ingot Social Inventory Increases, SHFE Zinc Opens Lower and Fluctuates [SMM Morning Comment Oct 15]

Waller: The US Fed should be more cautious about interest rate cuts than at the September meeting; OPEC lowers global oil demand growth forecasts for this year and next for the third consecutive month; Netanyahu: Israel will target Iran's military objectives, not nuclear or oil targets; Iran: If Israel's response is limited, this round of confrontation between the two countries is considered over; China's broad money balance grew 6.8% YoY; Xinhua Decoding: The scale of fiscal incremental policy may exceed 2.2 trillion yuan; The photovoltaic industry reached a consensus on "strengthening industry self-discipline to prevent cut-throat competition"; The Eastern Theater Command successfully completed the "Joint Sword-2024B" exercise.

Overnight, LME zinc opened at $3,120/mt, initially fluctuating to a high of $3,142/mt, then slowly declining to a low of $3,040/mt during the night session, and slightly rebounding to near the daily average line at the close, ending down at $3,094.5/mt, a decrease of $61.5/mt, or 1.95%. Trading volume increased to 13,671 lots, and open interest rose by 960 lots to 263,000 lots. Overnight, LME zinc recorded a bearish candlestick, with the 5-day moving average providing support. LME zinc inventory decreased by 1,375 mt to 240,625 mt, a drop of 0.57%. The previously announced stimulus policy from China provided limited support to market confidence, with demand concerns persisting, and the US dollar index rising, causing LME zinc to decline.

Overnight, the most-traded SHFE zinc 2411 contract opened at 25,035 yuan/mt, fluctuating around the daily average line after the opening, dipping to 24,890 yuan/mt, then slightly rising above the daily average line, peaking at 25,145 yuan/mt at the close, ending down at 25,135 yuan/mt, a decrease of 200 yuan/mt, or 0.79%. Trading volume decreased to 88,395 lots, and open interest decreased by 2,265 lots to 115,000 lots. Overnight, SHFE zinc recorded a bullish candlestick, with the 20-day moving average providing support. Influenced by overseas market trends, SHFE zinc opened lower, coupled with poor spot consumption performance at previous high zinc prices. Zinc ingot inventory increased WoW on Monday, and market concerns about future consumption persist, causing SHFE zinc to decline.

Tin

In the night session, SHFE tin prices opened low and fluctuated at low levels. The spot market was relatively active [SMM Tin Morning News Oct 15].

SMM, October 15: Yesterday, the most-traded SHFE tin contract closed at 264,200 yuan/mt, down 3,790 yuan/mt, a decrease of 1.41%, with a high of 264,750 yuan/mt and a low of 262,130 yuan/mt. During yesterday's morning session, trading companies quoted domestic tin ingot brands with little change in premiums and discounts compared to recent days. Small brand tin ingots were quoted against the SHFE 2411 contract at +0~+200 yuan/mt, delivery brand+200~+600 yuan/mt, Yunnan tin brand quotations +600~+800 yuan/mt, and imported tin brand spot quotations -700 yuan/mt. Yesterday morning, tin prices fluctuated downward, and most downstream companies began partial restocking and purchasing. Some trading companies transacted around 10 mt, while a few traded 2-3 trucks. Overall, the spot market was relatively active yesterday.

Nickel

On October 14, Jinchuan nickel was quoted at a premium of 1,400-1,500 yuan/mt, with an average price of 1,450 yuan/mt, down 50 yuan/mt from the previous trading day. Norilsk nickel was quoted at a discount of 400-200 yuan/mt, with an average of 300 yuan/mt, unchanged from the previous trading day. On the morning of October 14, the futures market fluctuated, and spot premiums widened compared to the previous working day. Nickel briquette prices were 133,800-134,350 yuan/mt, up 125 yuan/mt from the previous trading day. The price spread between nickel briquette and nickel sulphate was approximately 6,006.82 yuan/mt (nickel sulphate prices were 6,006.82 yuan/mt lower than nickel briquette prices).