SMM Morning Comment For SHFE Base Metals (Oct 28)

SHANGHAI, Oct 28 (SMM) –

Copper

Macro Front and Fundamentals Lack Resonance, Copper Prices Fluctuate Rangebound [SMM Copper Morning Comment]

Last Friday evening, LME copper opened at $9,495.5/mt, initially dipped to $9,484.5/mt, then climbed all the way up, reaching $9,608/mt near the close, and finally dropped back slightly to close at $9,563.5/mt, up 0.01%. Trading volume reached 15,000 lots, and open interest was 276,000 lots. Last Friday evening, the most-traded SHFE copper 2412 contract opened and dipped to 76,520 yuan/mt, initially fluctuated higher to an intraday high of 76,890 yuan/mt, fluctuated rangebound near the close, and finally closed at 76,700 yuan/mt, up 0.3%. Trading volume reached 32,000 lots, and open interest was 152,000 lots. Macro side, investors assessed the continuous conflicts in the Middle East and the upcoming US election, with crude oil rising, which was bullish for copper prices. Domestically, Premier Li Qiang of the State Council held a regular meeting, emphasizing the need to strive to achieve the annual economic and social development goals, continuously implement a package of incremental policies, timely evaluate and optimize policies, increase counter-cyclical adjustments, and further enhance the effectiveness of macro-control. Fundamentals side, supply side, domestic copper cathode arrivals were limited, and the impact of the previous large inflow of imported copper gradually faded, leading to tight spot copper cathode. Demand side, due to the slight fluctuation in copper prices, downstream buyers remained cautious and mainly restocked on a need basis, resulting in weak spot market transactions. This week, as the market enters the trading of cargoes with invoices dated next month, market activity remains low, and spot premiums are expected to drop back slightly. Price side, domestic policy expectations provide support for copper prices, but fundamentals do not support further increases. Overall, macro front and fundamentals lack resonance, and copper prices are expected to maintain a fluctuating trend today with some resistance on the upside.

Aluminum

Aluminum Ingot Continues Destocking, Aluminum Prices Fluctuate at High Levels Supported by Costs [SMM Aluminum Morning Meeting Summary Oct 28]

Last Friday night, the most-traded SHFE aluminum 2412 contract opened at 20,875 yuan/mt, reaching a high of 21,020 yuan/mt and a low of 20,870 yuan/mt, and closed at 20,980 yuan/mt, up 140 yuan/mt or 0.67% from the previous close. Trading volume was 76,100 lots, and open interest was 212,000 lots, with a daily decrease of 3,100 lots. On Friday, LME aluminum opened at $2,649/mt, reaching a high of $2,685.5/mt and a low of $2,593.5/mt, and closed at $2,670/mt, up $30.5/mt or 1.16%.

Summary: Macro front, domestic policies continue to boost the economy, global market liquidity is ample, but the potential ceasefire in the Middle East introduces new variables to macro sentiment. Fundamentals side, the bauxite supply crisis has driven alumina prices to high levels, significantly increasing costs in the aluminum industry. Overall, current aluminum ingot spot inventory continues destocking, while the cost side supports aluminum prices to fluctuate at relatively high levels.

Lead

Tug-of-war between longs and shorts, short-term lead prices may continue to fluctuate [SMM Lead Morning Comment]

Last Friday night, LME lead opened at $2,074/mt. During the Asian session, it briefly touched $2,074/mt before declining. In the European session, it continued to fluctuate downward, hitting a low of $2,014/mt, down $30/mt or 1.45%, recording a large bearish candlestick.

Last Friday night, the most-traded SHFE lead 2412 contract opened at 16,770 yuan/mt. It initially fluctuated upward, reaching a high of 16,835 yuan/mt before consolidating and then falling under pressure, finally closing at 16,765 yuan/mt, down 30 yuan/mt or 0.18%.

Macro side, the US dollar index strengthened, and market investors awaited the employment data to be released this week. On Saturday, China's Vice Minister of Finance Liao Min stated that China's economic stimulus plan aims to boost consumption. Besides monetary policy, China will also increase counter-cyclical adjustments in fiscal policy and is confident in achieving the annual economic growth target of around 5%.

Fundamentals side, contradictions are not yet prominent, and downstream enterprises maintain restock as needed. The long-term contracts for lead ingots for November have started to be delivered, and downstream enterprises may reduce spot order purchases. Social inventory of lead ingots first decreased and then increased, with the risk of inventory buildup still existing in the future. Additionally, battery scrap prices are more likely to rise than fall. In some regions, secondary refined lead is sold ex-factory at a premium of 0-50 yuan/mt over the SMM 1# lead average price, with sellers reluctant to sell. Domestic lead prices have strong support at the bottom, and short-term prices may continue to fluctuate.

Zinc

Supply-side Tightness Supports Zinc Prices, SHFE Zinc Fluctuates at Highs [SMM Zinc Morning Comment Oct 28]

Over the weekend, Israel launched a military strike on Iran. Sources said Iran informed Israel through a third party that it would not respond. US media reported that Iran's Supreme Leader Khamenei is seriously ill. The head of Israel's Mossad led secret talks on a Gaza ceasefire, but Israeli media revealed that he has not yet been authorized. The final results of Japan's House of Representatives election showed that the ruling coalition did not win a majority of seats. Chinese President Xi Jinping emphasized strengthening inclusive, basic, and bottom-line social welfare. The Vice Minister of Finance stated that China is confident in achieving an annual economic growth target of around 5%. The State Council stressed the need to focus on achieving the annual economic and social development goals and to continue implementing a package of incremental policies. In Q3 this year, Central Huijin significantly increased its holdings of several broad-based ETFs.

Last Friday, LME zinc opened at $3,183/mt, reaching a high at the opening. Subsequently, LME zinc fluctuated downward below the daily moving average, hitting a low of $3,034/mt. Then, LME zinc's focus shifted upward above the daily moving average, and by the end of the session, it fluctuated rangebound around $3,100/mt, closing down at $3,099.5/mt, a decrease of $74.5/mt or 2.35%. Trading volume decreased to 103,000 lots, and open interest increased by 1,031 lots to 258,000 lots. Last Friday, LME zinc recorded a V-shaped reversal. The upper Bollinger Bands formed resistance, while the 40-day moving average provided support. LME inventory increased by 3,275 mt to 242,425 mt, an increase of 1.37%, and social inventory also increased. Currently, international regional tensions persist, and supply-side tightness continues, causing LME zinc to fluctuate.

Last Friday, the most-traded SHFE zinc 2412 contract opened at 24,915 yuan/mt. At the beginning of the session, shorts increased their positions, causing SHFE zinc to fluctuate around the daily moving average and hit a low of 24,865 yuan/mt. Subsequently, shorts reduced their positions, and SHFE zinc fluctuated upward above the daily moving average, reaching a high of 25,090 yuan/mt. By the end of the session, longs reduced their positions, causing SHFE zinc to slightly decline, closing down at 25,005 yuan/mt, a decrease of 25 yuan/mt or 0.10%. Trading volume decreased to 80,425 lots, and open interest decreased by 1,400 lots to 114,000 lots. Last Friday, SHFE zinc recorded a small bullish candlestick. The 5-day moving average formed resistance, while the middle Bollinger Bands provided support. Currently, supply-side tightness supports SHFE zinc fluctuating at highs, and more macro data needs to be monitored in the future.

Tin

The SHFE tin prices opened higher and moved up during the night session, with downstream purchasing remaining cautious [SMM Tin Morning News Oct 28]

SMM, October 28, 2024: Last Friday, the most-traded SHFE tin contract closed at 256,320 yuan/mt, up 1,800 yuan/mt, an increase of 0.74%. During the early session last Friday, the quotations for various domestic tin ingot brands by trading companies showed little change compared to recent days. Among them, small brand tin ingot quotations against the SHFE 2411 contract were +0~+200 yuan/mt, delivery brand prices were +200~+600 yuan/mt against the SHFE 2411 contract, Yunnan tin brand quotations against the SHFE 2411 contract were +600~+800 yuan/mt, and imported tin brand spot cargo quotations were -700 yuan/mt against the SHFE 2411 contract. Last Friday, tin prices fluctuated rangebound, and downstream companies were cautious in their purchasing. Most trading companies had scattered transactions, with a few trading companies transacting around one truckload. Overall, the spot market remained sluggish last Friday.

Nickel

Last week, refined nickel prices fluctuated between 125,000-130,000 yuan/mt, showing a slight correction compared to the previous period. There were no significant structural changes compared to the previous week. Nickel ore prices softened, exerting some pressure on nickel prices. Across the entire industry chain, demand from the two major sectors, stainless steel and ternary cathode precursors, remained weak. For ternary cathode precursors, the demand for nickel sulphate was weak, and the market was sluggish. Coupled with a slight decline in raw material prices for nickel sulphate, nickel sulphate prices trended downward during the week. On the stainless steel side, due to inventory buildup of finished products, downstream procurement of raw materials was limited, leading to a slight decline in NPI prices during the week. On the upstream raw material side, MHP and high-grade nickel matte projects were in the ramp-up phase, with supply steadily increasing. The overall primary nickel market remained in surplus, with the supply surplus expected to gradually widen. Therefore, SMM believes that there is still upward resistance to nickel prices. Nickel prices are expected to range between 122,000-128,000 yuan/mt this week.