SMM Morning Comment For SHFE Base Metals On November 8

SHANGHAI, November 8 (SMM) –

Copper

LME copper opened at $9,527/mt overnight, initially dipped to $9,490/mt, then climbed throughout the session, fluctuated rangebound at the end, and peaked at $9,688.5/mt, finally closing at $9,678.5/mt. The open interest was 277,000 lots. The most-traded SHFE copper 2412 contract opened at 76,950 yuan/mt overnight, initially dipped to 76,850 yuan/mt, then slightly fluctuated upward throughout the session, peaked at 77,630 yuan/mt at the end, and finally closed at 77,590 yuan/mt, up 2.12%. The trading volume was 44,000 lots and open interest was 152,000 lots. Macro front, the Trump trade cooled down, and the US Fed announced a 25 basis points interest rate cut at its November meeting, with Powell providing no strong hints of a pause in future rate cuts, weakening the US dollar index and boosting copper prices. Domestically, the National People's Congress Standing Committee convened, and the market expects more favourable macro policies to be introduced, leading to a rise in copper prices. On the fundamentals, copper prices have been volatile recently, with both buyers and sellers adopting a wait-and-see attitude, and only a small amount of consumption recovery when copper prices fall. As of Thursday, November 7, SMM copper inventories in major regions nationwide decreased by 5,600 mt compared to Monday to 192,500 mt and down 17,300 mt compared to last Thursday, marking the third consecutive week of destocking. Overall, with the US dollar index retreating, copper prices are expected to be supported today and fluctuate at highs.

Aluminum

Futures market: The most-traded SHFE aluminum 2412 contract opened at 21,650 yuan/mt overnight, with a high of 21,820 yuan/mt, a low of 21,560 yuan/mt, and closed at 21,735 yuan/mt, up 755 yuan/mt from the previous close, an increase of 3.60%. The trading volume was 121,000 lots, and the open interest was 225,000 lots, with a daily reduction of 4,154 lots. On Thursday, LME aluminum opened at $2,615/mt, reached a high of $2,732/mt, a low of $2,614.5/mt, and closed at $2,704.5/mt, up $89.5/mt, an increase of 3.42%.

Summary: On the macro front, the US Fed and the Bank of England cut interest rates again, boosting macro sentiment, leading to a rise in aluminum prices overnight. In the medium and long term, attention should still be paid to global monetary policies and inflation. On the fundamentals side, the recent significant increase in aluminum costs has led some companies to plan for maintenance, but with limited impact on production, and the supply and demand relationship remains relatively stable. Social inventory has been affected by transportation, continuously destocking to below the 600,000 mt mark. Spot alumina supply is tight, coupled with production disruptions from some companies, leading to alumina prices fluctuating upward, providing strong support for aluminum prices on the cost side. Overall, domestic aluminum remains in a state of low inventory and rising costs, and short-term aluminum prices may fluctuate upward.

Lead

Overnight, LME lead opened at $2,037.5/mt, briefly touched a low of $2,034.5/mt during the Asian session, fluctuated upward to a high of $2,060/mt in the European session, and dropped back slightly at the end to close at $2,037/mt, down 0.44%.

Overnight, the most-traded SHFE lead 2412 contract opened at a high of 16,950 yuan/mt. Due to increased short positions, SHFE lead fluctuated downward, hitting a low of 16,810 yuan/mt at the end and closing at 16,840 yuan/mt, up 0.24%.

Macro side, the US Fed's November meeting unanimously agreed to cut interest rates by 25 basis points, removing the phrase "more confident" regarding inflation from the statement. Powell stated he would not resign because of Trump and would not resign voluntarily; in the short term, elections will not impact policy; future interest rate cuts can be fast or slow as needed, and rate hikes are not planned; the omission of the confidence phrase does not imply any hint about sticky inflation; he does not wish to provide too much forward guidance. According to China Customs statistics, in the first 10 months of this year, China's total import and export value of goods trade was 36.02 trillion yuan, up 5.2% YoY.

Fundamentals, air pollution warnings in regions such as Henan, Hebei, and Anhui have been lifted. On one hand, transportation restrictions for some primary lead smelters have ended, and on the other hand, secondary lead smelters have resumed production. Meanwhile, with only six working days left until the SHFE lead 2411 contract delivery date, suppliers are increasing the volume of lead ingots transferred from in-plant inventory to social warehouses. Overall, short-term inventory buildup pressure may keep lead prices fluctuating rangebound.

Zinc

Overnight, LME zinc opened at $2,970/mt, hitting the intraday low at the opening. Subsequently, shorts reduced their positions, and LME zinc fluctuated upward, reaching a high of $3,092/mt during the night session. However, lacking upward momentum, LME zinc fluctuated along the daily moving average and finally closed up at $3,071/mt, an increase of $105/mt or 3.54%. Trading volume decreased to 13,591 lots, and open interest fell by 4,413 lots to 243,000 lots. Overnight, LME zinc recorded a bullish candlestick with no lower shadow. LME inventory decreased by 100 mt to 245,225 mt, a decline of 0.04%. On the macro front, the disturbance from Trump's election victory has ended, the US dollar weakened, and the US Fed is still expected to cut interest rates. Base metals generally rose, with LME zinc pulling up. LME zinc is expected to fluctuate at high levels today.

Overnight, the most-traded SHFE zinc 2412 contract opened at 25,300 yuan/mt. At the beginning of the session, longs increased their positions, and SHFE zinc fluctuated upward, reaching a high of 25,430 yuan/mt. Later, SHFE zinc fluctuated along the daily moving average and finally closed up at 25,290 yuan/mt, an increase of 120 yuan/mt or 0.48%. Trading volume decreased to 77,078 lots, and open interest increased by 4,356 lots to 108,000 lots. Overnight, SHFE zinc recorded a small bearish candlestick. Market sentiment gradually recovered from the negative sentiment brought by the US election. There are still expectations for domestic policy release, ferrous metals prices rebounded, and SHFE zinc focus shifted upward. SHFE zinc is expected to fluctuate at high levels today.

Tin

Yesterday, trading in the spot tin market was mediocre, with trade companies' quotations remaining stable and showing no significant fluctuations. The price range for domestic brands of tin ingots was relatively fixed. The small brand and imported tin ingots were quoted at slight discounts against the SMM 1# tin ingot price, while delivery brand and Yunnan Tin brand ingots had a slight premium over the SMM 1# tin ingot price. In yesterday's market, tin prices overall remained at a high level, fluctuating during the night session, and trading activity in the spot market remained sluggish. Most downstream enterprises continued to adopt a wait-and-see attitude, with a few restocking as needed. Most companies had scattered trading volumes, with a few achieving trading volumes of 20-30 mt. Overall, the market trading atmosphere was not strong. In summary, if tin prices continue to hover at high levels, spot market trading is unlikely to heat up.

Nickel

On November 7, Jinchuan nickel was quoted at a premium of 1,700-1,800 yuan/mt, with an average of 1,750 yuan/mt, remaining flat compared to the previous trading day. Norilsk nickel was quoted at a discount of 400-0 yuan/mt, with an average of 200 yuan/mt, also remaining flat compared to the previous trading day. On the morning of November 7, the futures market fluctuated upward, and there was no significant change in spot market premiums compared to the previous working day. Nickel briquette prices were 126,050-126,350 yuan/mt (out of stock), up 575 yuan/mt from the previous trading day. The price spread between nickel sulphate and nickel briquette was approximately 2,223 yuan/mt (nickel sulphate prices were 2,223 yuan/mt lower than nickel briquette prices).