SMM Morning Comment For SHFE Base Metals On November 27

SHANGHAI, November 27 (SMM) –

Copper

LME copper opened at $9,019.5/mt overnight, initially rose slightly to $9,072.5/mt, then fluctuated downward, hitting a low of $8,950.5/mt near the close, and finally settled at $8,962.5/mt, down 0.9%. Trading volume reached 19,000 lots, and open interest was 269,000 lots. The most-traded SHFE copper 2501 contract opened at 74,020 yuan/mt overnight, initially peaked at 74,310 yuan/mt, then declined to a low of 73,670 yuan/mt during the session, and finally consolidated sideways to close at 73,760 yuan/mt, down 0.14%. Trading volume reached 29,000 lots, and open interest was 151,000 lots. Macro side, the US Fed's meeting minutes indicated that officials are inclined to cut interest rates gradually in the future, with some analysts already predicting a pause in rate cuts next month. Meanwhile, Trump promised to impose significant tariffs on Canada and Mexico. The US dollar index rebounded slightly, and all three major US stock indices closed higher, which was bearish for copper prices. Some analysts also noted that the inflation risk from the tariff hike could hinder the US Fed's rate cuts. Fundamentally, as trading shifted to cargoes with invoices dated next month yesterday, downstream buyers mostly sought cargoes with invoices dated this month. Some suppliers stood firm on quotes and were reluctant to sell, leading to overall poor market transactions. Recently, both imported and domestic copper arrivals in Guangdong have been low, and downstream orders in Guangdong have been strong, with some copper rod plants operating at full capacity. As a result, local inventories in Guangdong have almost depleted. Additionally, due to the still significant price spread between Shanghai and Guangdong, some east China cargoes are expected to move south, providing support for the bottom of the premiums. Price side, there remains significant macro uncertainty, and the market is awaiting more data from the US. Resistance to copper prices persists.

Aluminum

Futures: The most-traded SHFE aluminum 2501 contract opened at 20,560 yuan/mt overnight, reaching a high of 20,615 yuan/mt and a low of 20,505 yuan/mt, closing at 20,540 yuan/mt, down 60 yuan/mt from the previous day, a decline of 0.29%. Yesterday, LME aluminum opened at $2,643/mt, hitting a high of $2,643.5/mt and a low of $2,600.5/mt, closing at $2,609/mt, down $38.5/mt, a decline of 1.45%.

Summary: On the macro front, as Trump vowed to impose tariffs on Canada, Mexico, and China, the US dollar index rebounded slightly, further suppressing the performance of base metals. Multiple sources confirmed that Lebanon and Israel reached a ceasefire, but geopolitical uncertainties increased, and market risk aversion continued to rise. Domestically, the central bank and eight other departments jointly held a meeting to promote loans for technological innovation and transformation, proposing to tilt policies more towards private and small and medium-sized enterprises. Fundamentals side, aluminum costs fluctuated at highs, raising market concerns about production cuts at high-cost enterprises. Downstream demand rebounded slightly in the short term, stimulated by a rush to export. On the inventory side, multiple sources reported that railway shipments in Xinjiang have continued to improve, temporarily easing backlog pressure. With the concentrated arrival of goods in transit, despite continued outflows from warehouses over the past week, inventory buildup is expected this week. The off-season inventory turning point is expected to arrive soon, potentially easing the tight spot market in China. The support for aluminum prices from low inventory has gradually weakened. In the short term, the support logic of high costs and low inventory for domestic aluminum remains, but its support for aluminum prices has weakened. Coupled with the negative impact of the cancellation of export tax rebates for aluminum semis on medium and long-term aluminum demand, overall market sentiment is under pressure. Aluminum prices are expected to fluctuate and consolidate in the near term.

Lead

Overnight, LME lead opened with a gap at $2,017.5/mt, fluctuated rangebound during the Asian session, dipped to $2,005/mt in the European session, then rebounded to $2,035.5/mt, and finally pulled back to close at $2,010/mt, down 0.62%.

Overnight, the most-traded SHFE lead 2501 contract opened at 17,220 yuan/mt, briefly touched a low of 17,195 yuan/mt at the beginning of the session, then fluctuated around 17,240 yuan/mt, and finally closed at 17,235 yuan/mt, up 0.26%, marking a four-day winning streak.

Macro side, the US Fed meeting minutes indicated that officials lean towards a gradual approach to future interest rate cuts; some officials mentioned persistently high inflation and a weak labour market as reasons for potentially pausing or accelerating easing respectively; future considerations include lowering the overnight reverse repo rate by 5 basis points to align it with the lower bound of the federal funds rate. China's Ministry of Finance reported that from January to October, the total operating revenue of state-owned and state-controlled enterprises nationwide increased by 0.9% YoY, while total profits decreased by 1.1% YoY.

Fundamentals: entering winter, frequent occurrences of smog, heavy snow, and frost in north China, along with issues related to environmental protection-related controls and vehicle transportation, may severely impact the production of secondary lead in major production areas such as Anhui, Hebei, and Inner Mongolia. Additionally, recent new maintenance plans at primary lead smelting enterprises have led to a temporary tightness in spot market supply. Currently, consumption of two-wheeled electric bicycles has entered the off-season, while consumption of automobiles and some three-wheeled electric vehicles remains moderate. Some lead-acid battery producers may reduce production in December, but the actual impact remains to be seen. Overall, lead prices may continue to fluctuate upward in the short term.

Zinc

Overnight, the US Fed meeting minutes indicated that officials are inclined to cut interest rates gradually in the future. Multiple parties confirmed a ceasefire between Lebanon and Israel. Biden stated that he will push for a ceasefire in Gaza with multiple countries in the coming days. OPEC+ sources revealed that discussions are underway to delay production increases. Xi Jinping met with Singapore's Senior Minister Lee Hsien Loong. China responded to US comments on anti-drug measures and the 10% tariff, stating that the US should cherish China's goodwill. The Shenzhen Stock Exchange has formulated guidelines for reviewing IPOs on the ChiNext board.

Overnight, LME zinc opened at $3,007/mt. At the beginning of the session, LME zinc fluctuated upward above the daily average line. Near midday, it fluctuated downward below the daily average line. During European trading hours, LME zinc quickly moved upward, fluctuating around $3,080/mt, peaking at $3,095.5/mt. By the end of the session, LME zinc slightly declined, fluctuating around the daily average line, and finally closed up at $3,065/mt, an increase of $45/mt or 1.45%. Trading volume increased to 117,000 lots, and open interest increased by 86 lots to 245,000 lots. Overnight, LME zinc recorded a bullish candle, with the upper Bollinger Band forming resistance and the 10-day moving average providing support below. LME inventory decreased by 2,575 mt to 255,625 mt, a reduction of 1.00%. The continuous decrease in LME inventory supports zinc prices, but the rising US dollar index will exert pressure on zinc prices. Zinc prices are expected to maintain a fluctuating trend in the short term.

Overnight, the most-traded SHFE zinc 2501 contract opened at 25,425 yuan/mt. At the opening, SHFE zinc hit a low of 25,385 yuan/mt. Subsequently, bulls increased their positions, pushing SHFE zinc center upward to fluctuate rangebound near the daily average line, peaking at 25,620 yuan/mt. It finally closed up at 25,520 yuan/mt, an increase of 345 yuan/mt or 1.37%. Trading volume decreased to 103,000 lots, and open interest increased by 15,963 lots to 141,000 lots. Overnight, SHFE zinc recorded a bullish candle, with various moving averages below providing support. Currently, the tight supply of ore persists, and end-use consumption has slightly improved recently. Zinc prices are expected to fluctuate upward in the short term.

Tin

Yesterday, the spot tin market remained sluggish, with trading enterprises' quotations staying relatively stable and showing no significant fluctuations. The price range of domestic tin ingots across various brands was relatively fixed. Small brand tin ingots and imported tin ingots had a slight discount against the SMM 1# tin ingot price, while delivery brand and Yunnan Tin brand tin ingots had a slight premium against the SMM 1# tin ingot price. In yesterday's market, tin prices slightly rose before falling back, and during the night session, they moved downwards after a higher opening. Trading activities in the spot market were somewhat sluggish. Although some traders pre-sold imported tin at discounts, most downstream enterprises had completed their restocking needs and showed little interest in purchasing low-priced imported tin. Regarding trading enterprises, most had scattered transactions, with a few achieving trading volumes of 20-30 mt. Overall, the market's trading atmosphere was relatively cold, and if tin prices remain volatile, the spot market may continue to experience a sluggish situation.

Nickel

Spot premiums/discounts: The mainstream spot premium for Jinchuan #1 nickel was 3,100-3,500 yuan/mt, with an average of 3,300 yuan/mt, remaining flat compared to the previous trading day. The spot discount for Norilsk nickel was 200-0 yuan/mt, with an average of 100 yuan/mt, also remaining flat compared to the previous trading day.

Futures market: On November 26, following a 1.29% increase during the night session to 128,710 yuan/mt, the most-traded SHFE nickel contract opened lower and experienced wide fluctuations, closing at 128,460 yuan/mt, up 1,390 yuan/mt, an increase of 1.09%. Open interest shifted and overall decreased.

Spot market: In the morning, the premium for Jinchuan brand nickel plates in east and south China continued to maintain the high level from the previous working day. The restocking pace of downstream buyers and the increase in exports of domestic electrodeposited nickel have led to a continued tightening of spot supply. Currently, apart from the Jinchuan brand, other brands of nickel plates are relatively abundant in the market. The future logic of nickel prices still needs to pay attention to the overall impact of domestic policies on base metals and changes in Indonesian policies.

Price spread: The price of nickel briquette was 127,100-127,500 yuan/mt (in short supply), up 300 yuan/mt from the previous trading day. The price spread between nickel sulphate and nickel briquette was approximately 7,527 yuan/mt (nickel sulphate prices were 7,527 yuan/mt lower than nickel briquette prices).