SMM Morning Comment For SHFE Base Metals (Nov 18)

SHANGHAI, Nov 18 (SMM) –

Copper

US Fed December Interest Rate Cut Probability Reduces, Market Awaits Further Copper Price Decline [SMM Copper Morning Comment]

Last Friday night, LME copper opened at $9,120.5/mt. Initially, the focus rose, and LME copper reached a high of $9,179.5/mt, then fluctuated downward throughout the session, hitting a low of $8,955.5/mt at the end, and finally closed at $8,971/mt, a decline of 0.59%. Trading volume reached 30,000 lots, and open interest reached 280,000 lots. Last Friday night, the most-traded SHFE copper 2412 contract opened at 74,600 yuan/mt. Initially, it reached a high of 74,630 yuan/mt, then fluctuated downward throughout the session, hitting a low of 73,290 yuan/mt at the end, and finally closed at 73,550 yuan/mt, a decline of 0.26%. Trading volume reached 43,000 lots, and open interest reached 140,000 lots. Macro side, US October retail sales data exceeded expectations, with a monthly rate of 0.4%, and September increase was revised up from 0.4% to 0.8%. Traders reduced their bets on a US Fed interest rate cut in 2025 and cut the probability of a December interest rate cut to about 50%. Meanwhile, US Fed officials indicated no urgent need for a rate cut. Fundamentally, copper prices fell below 74,000 yuan/mt. Overall consumption has warmed up, but due to the previous stabilization of copper prices and the focus on the Copper Conference during the week, the increase in consumption was limited. If copper prices continue to decline, consumption is expected to remain supported. In summary, with consumption warming up and the US dollar index remaining strong, copper prices are expected to stabilize at this level.

Aluminum

The cancellation of aluminum semis export tax rebates starting from December 1st, Significant divergence in domestic and overseas market trends last Friday [SMM Aluminum Morning Meeting Summary Nov 18]

Last Friday night, the most-traded SHFE aluminum 2501 contract opened at the highest point of 20,955 yuan/mt, fluctuated downward overall, reaching a low of 20,290 yuan/mt, and closed at 20,460 yuan/mt, down 340 yuan/mt from the previous close, a decline of 1.63%. The trading volume was 283,000 lots, the open interest was 212,000 lots, with a daily increase of 13,000 lots. Last Friday, LME aluminum opened at $2,522.5/mt, reached a high of $2,730/mt, a low of $2,521.5/mt, and closed at $2,656.5/mt, up $133/mt, an increase of 5.27%.

Summary: On the macro front, US October retail sales month-on-month recorded 0.4%, with September's growth revised up from 0.4% to 0.8%, reducing market bets on a US Fed interest rate cut in 2025. On the domestic fundamentals side, transportation conditions in north-west China improved, forcing a halt to the continuous destocking trend of aluminum ingot inventory, with an initial formation of an inventory inflection point. Low inventory support for aluminum prices may gradually weaken. Alumina spot cargo supply remained tight, coupled with production cuts and suspensions by some enterprises. However, recently, with official statements regarding the alumina market, alumina futures market sentiment has receded. Last Friday, the Ministry of Finance and the State Administration of Taxation announced the cancellation of aluminum semis export tax rebates, which will raise the export costs for export enterprises, inevitably suppressing export volumes and posing a short-term bearish impact on domestic aluminum prices. Overall, domestic aluminum remains in a state of low inventory and high costs, but the support for aluminum prices is gradually weakening. Additionally, the tax rebate policy has triggered market panic sentiment, and aluminum prices are expected to move downward in the near term.

Lead

Macro bearish sentiment continues to ferment, putting pressure on non-ferrous metals collectively; lead prices weakened briefly [SMM Lead Morning Comment]

Last Friday night, LME lead opened at $1,963.5/mt, consolidated around the intraday moving average during the Asian session, rose to a high of $1,996.5/mt during the European session, then fluctuated downward, with bulls reducing positions and exiting the market, hitting a low of $1,951/mt and closing at this level, down $13/mt, a decline of 0.66%.

Last Friday night, the most-traded SHFE lead 2412 contract opened at 16,760 yuan/mt, briefly touched a high of 16,815 yuan/mt at the beginning of the session, then weakened to a low of 16,710 yuan/mt, and closed at 16,735 yuan/mt, down 50 yuan/mt, a decline of 0.3%.

Macro side, US inflation showed little further progress in declining and the US dollar continued to fluctuate at high levels, putting pressure on non-ferrous metals, which generally weakened. Although LME lead inventory continued to decline, the price rebound of LME lead still needs to wait for the release of macro bearish sentiment. Last Friday, two domestic departments issued an announcement on adjusting the export tax rebate policy, causing a brief disturbance in the non-ferrous metals market. The adjustment of battery export tax rebates mentioned in the announcement does not involve lead-acid batteries for the time being.

Fundamentals side, the pressure of inventory buildup amid delivery led to a rise in social inventory, coupled with the drag of LME lead, causing SHFE lead bulls to also reduce positions to avoid risks, putting pressure on domestic lead prices to fall back. Environmental protection disturbances combined with the year-end routine maintenance expectations make the supply of secondary refined lead unstable, and the subsequent focus should be on the resumption progress of secondary lead enterprises and the changes in the premiums and discounts of secondary refined lead. After the lead delivery ends, delivery brand sources re-entering the market may affect the premiums of primary lead. Additionally, downstream battery enterprises' operating rates are moderate, and after the risk of sharp lead price fluctuations is eliminated, the enthusiasm for downstream enterprises to buy the dip and replenish inventory for rigid demand will gradually recover. This week, attention should still be paid to the return of downstream consumption.

Zinc

Longs Exit, SHFE Zinc Fluctuate Downward [SMM Zinc Morning Comment Nov 18]

Last Friday, LME zinc opened at $2,939/mt. In the early session, LME zinc fluctuated around the daily moving average. During European trading hours, LME zinc briefly dipped, then shorts took profits and exited, causing LME zinc to fluctuate upward, reaching a high of $3,029/mt. Subsequently, shorts attacked at the high level, leading to a "V" shaped reversal. During the night session, the focus shifted downward to fluctuate around $2,950/mt, finally closing up at $2,953.5/mt, an increase of $20.5/mt or 0.7%. Trading volume increased to 14,636 lots, while open interest decreased by 2,797 lots to 247,000 lots. Last Friday, LME zinc recorded a long upper shadow candlestick, with various moving averages above forming resistance. Last Friday, LME inventory increased by 6,450 mt to 248,450 mt, an increase of 2.67%, marking an increase in LME inventory. Last Friday, China announced to adjust the export tax rebate policy for aluminum and copper metal products. After a brief surge in sentiment due to reduced overseas supply, zinc prices returned to fluctuating rangebound.

Last Friday, the most-traded SHFE zinc 2412 contract opened with a gap up at 24,810 yuan/mt. In the early session, longs took profits and exited, causing SHFE zinc to plunge, reaching a low of 24,400 yuan/mt. Subsequently, the focus slightly shifted upward to fluctuate around 24,500 yuan/mt. During this period, it attempted to break above but was blocked near the daily moving average, finally closing down at 24,475 yuan/mt, a decrease of 205 yuan/mt or 0.83%. Trading volume decreased to 107,000 lots, while open interest decreased by 2,157 lots to 97,498 lots. Last Friday, SHFE zinc recorded a bearish candlestick, with the 20-day moving average above forming resistance and the 60-day moving average below providing support. Last Friday, China announced to adjust the export tax rebate policy, causing market concerns about reduced domestic exports and potential trade disputes. Longs exited to avoid risks, leading to an overall weak performance in non-ferrous metals.

Tin

The Strengthening US Dollar Suppresses SHFE Tin Prices; SHFE Tin Currently Under Pressure and Adjusting [SMM Tin Morning Meeting Summary Nov 18]

In last week's international situation, fluctuations in the US dollar exchange rate became a significant factor affecting the metals market, including SHFE tin prices. Due to unexpected rises in US inflation data and uncertainties regarding future interest rate cuts by the US Fed, the US dollar index saw a notable increase. This upward trend exerted considerable pressure on the non-ferrous metals market, especially the tin market. As the US dollar strengthened, various metal prices were suppressed globally.

Supply and demand side, this week SHFE tin prices were influenced by multiple factors. Firstly, on the supply side, news of potential resumption of tin ore production in Myanmar affected market expectations. As a major global producer of tin resources, the uncertainty in Myanmar's supply led the market to adopt a cautious attitude towards the long-term trend of tin prices. Meanwhile, Indonesia's tin export situation also remained a focal point for the market, as changes in its export volumes would directly impact the global tin supply landscape.

Considering the international situation and supply and demand factors, SHFE tin prices this week showed a trend of being under pressure and adjusting. The strengthening US dollar and uncertainties in the international political and economic environment imposed top resistance on SHFE tin prices, while changes in supply and demand fundamentals determined the range of tin price fluctuations to some extent. Looking ahead, SHFE tin prices are expected to continue being influenced by multiple factors, including the international economic environment, US dollar exchange rate, and changes in tin ore supply and demand. Investors need to closely monitor these trends when analyzing and forecasting SHFE tin prices to make more scientific and effective investment decisions.

Nickel

During the week, refined nickel prices fluctuated downward, operating in the range of 124,000-129,000 yuan/mt. Fundamentally, there were no significant structural changes WoW. Last week, the demand from ternary cathode precursors, stainless steel, and alloy electroplating remained weak. Although the macro aspect saw a positive impact from the US interest rate cut, nickel prices continued to decline due to weak fundamentals and high inventories both domestically and internationally. From the perspective of the nickel industry chain, in the nickel sulphate sector, the purchase willingness for nickel sulphate by precursors remained low, with both supply and demand weak, leading to continuous price declines. In the NPI sector, NPI prices saw a slight correction due to the drag from stainless steel prices. Regarding the fundamentals of refined nickel itself, downstream alloy casting orders were relatively saturated before the year-end, and Q4 is expected to be the peak season for civilian nickel-based alloy demand. However, due to lower-than-expected orders and some refined nickel being replaced by scrap as raw material, coupled with certain inventory levels of raw materials, the incremental demand for nickel is limited. In the electroplating sector, the demand for refined nickel remained weak, with a heavy wait-and-see sentiment downstream, and no concentrated purchasing or stocking observed, resulting in low activity in nickel plate shipments. Overall, last week saw a weakening macro environment combined with bearish fundamentals, strengthening the downward trend for nickel prices. SMM expects that this week, nickel prices may continue the trend of last week, with room for further decline. The expected operating range is 118,000-126,000 yuan/mt.