SMM Morning Comment For SHFE Base Metals On December 11

SHANGHAI, December 11 (SMM) –

Copper

LME copper opened at $9,198/mt overnight, initially rose slightly, then dropped back to $9,177.5/mt, and subsequently fluctuated upward, reaching a high of $9,242/mt near the close. It finally settled at $9,233.5/mt, with a 0.02% increase. Trading volume reached 12,000 lots, and open interest was 271,000 lots. Overnight, the most-traded SHFE copper 2501 contract opened at 75,160 yuan/mt, fluctuated rangebound initially, dropping to 75,120 yuan/mt, then rose to an intraday high of 75,490 yuan/mt, and finally dropped back slightly to close at 75,410 yuan/mt, with no change. Trading volume reached 22,000 lots, and open interest was 152,000 lots. Macro side, President Xi Jinping stated that China is fully confident in achieving this year's economic growth targets, and the market is also awaiting more stimulus policies to be announced at the Central Economic Work Conference, providing support for copper prices at the bottom. However, ahead of the release of the US November CPI data today, the US dollar index continued to rise, putting pressure on copper prices with limited gains. Fundamentally, from the supply side, as the last trading day of the SHFE copper 2412 contract approaches, suppliers are concentrating on clearing inventory, leading to an increase in spot copper cathode supply. On the consumption side, although copper prices surged, downstream purchasing sentiment remained lukewarm, with opportunistic low-price buying prevailing, resulting in overall average transaction performance. In terms of prices, without the introduction of substantial policies or economic data, the market may remain in a wait-and-see mode, and copper prices are expected to stabilize today.

Aluminum

Overnight, the most-traded SHFE aluminum 2501 contract opened at 20,300 yuan/mt, reached a high of 20,375 yuan/mt, a low of 20,290 yuan/mt, and closed at 20,365 yuan/mt, up 70 yuan/mt from the previous day, an increase of 0.35%. On Tuesday, LME aluminum opened at $2,590.5/mt, reached a high of $2,619.5/mt, a low of $2,570/mt, and closed at $2,615/mt, up $18.5/mt, an increase of 0.71%.

Summary: On the macro front, the previously expected easing of the hot war situation has once again become volatile. On the fundamentals side, high aluminum costs are raising concerns about production cuts. On the demand side, it is currently the off-season for consumption, and the operating rate of aluminum processing enterprises is declining, but the social inventory of aluminum ingots remains at a relatively low level of below 600,000 mt. In the short term, aluminum prices are expected to fluctuate. Changes in the macro situation and the direction of aluminum costs remain the biggest variables at present.

Lead

Overnight, LME lead opened at $2,071/mt and fluctuated around the daily moving average during the Asian session. Entering the European session, it weakened after consolidating at highs and finally closed at $2,058/mt, down $1/mt, a decrease of 0.05%.

Overnight, the most-traded SHFE lead 2501 contract opened at 17,720 yuan/mt. It initially consolidated around the daily moving average, then dipped to 17,570 yuan/mt before rebounding in a V-shape to close at 17,650 yuan/mt, down 60 yuan/mt, a decrease of 0.34%.

Macro side, the US dollar index fluctuated upward, and US inflation data may provide clues for the US Fed's monetary easing path.

Fundamentals side, primary lead smelters experienced resumption as well as maintenance, and secondary refined lead production slowly recovered with shipments at slight discounts. The sentiment of standing firm on quotes and reluctance to sell has eased. Additionally, with the end of the peak season for battery replacement, battery scrap recycling has also entered the off-season. Future attention is needed on raw material supply and whether battery scrap prices will affect secondary refined lead production. Despite suppliers transferring inventory to warehouses, primary lead smelter inventory remains low, and downstream just-in-time procurement has also shifted to warehouse sources. The increase in social inventory is expected to be limited, and lead prices may continue to hover at highs.

Zinc

Reports indicated that Israeli forces entered an area approximately 25 kilometers northwest of Damascus, the capital of Syria, which was denied by Israel; the Biden administration has been cooperating with the Trump team to achieve a Gaza ceasefire agreement before the latter takes office; South Korea's ruling party discussed the possibility of Yoon Suk-yeol resigning in February or March next year; the Reserve Bank of Australia kept the benchmark interest rate unchanged for the ninth consecutive time; Microsoft shareholders voted against a Bitcoin investment proposal; President Xi Jinping stated that China is fully confident in achieving this year's economic growth target; in the first 11 months of this year, China's total import and export value of goods increased by 4.9% YoY.

Overnight, LME zinc opened at $3,115.5/mt, fluctuated along the daily moving average after the opening, dipped to $3,101.5/mt during midday, then rebounded and climbed all the way up, reaching a high of $3,150.5/mt at the end of the session, and finally closed up at $3,149/mt, up $21/mt, or 0.67%. Trading volume decreased to 6,398 lots, and open interest decreased to 240,000 lots. Overnight, LME zinc recorded a bullish candlestick, with the upper Bollinger Band forming resistance. LME zinc inventory decreased by 1,075 mt to 277,050 mt, a decline of 0.39%. Previous favorable policies still provided support, but the strengthening US dollar index exerted pressure on zinc prices. Overall, LME zinc hovered at highs, with attention on the release of US inflation data today.

Overnight, the most-traded SHFE zinc 2501 contract opened at 25,800 yuan/mt, fluctuated rangebound along the daily moving average after the opening, dipped to 25,730 yuan/mt at the beginning of the session, then briefly surged to a high of 25,875 yuan/mt, and after a pullback, climbed again at the end of the session, finally closing up at 25,870 yuan/mt, up 95 yuan/mt, or 0.37%. Open interest decreased to 52,454 lots, while open interest increased by 2,163 lots to 137,000 lots. Overnight, the most-traded SHFE zinc contract recorded a bullish candlestick, with the 5-day moving average below providing support. Market optimism persisted, and zinc prices fluctuated at highs. However, with smelter production expected to increase in December, support from the supply side weakened, awaiting further macro guidance.

Tin

In yesterday's night session, SHFE tin prices experienced a slight uptick, briefly breaking the significant threshold of 250,000 yuan before quickly retreating and entering a stable sideways consolidation phase. In contrast, the spot market yesterday saw a rather quiet trading atmosphere, with overall trading volume at a low level. On the smelter side, although most manufacturers' quotes remained stable around 250,000 yuan, actual shipments were not ideal, reflecting weak market demand. Trading enterprises actively quoted prices to seek trading opportunities; however, the market response was tepid, with most downstream enterprises choosing to wait and see, expecting prices to fall further. Only a few downstream enterprises made purchases due to rigid demand. From the overall market trading situation, activity remained sluggish. Most trading enterprises' trading volumes were limited to scattered transactions, with only a few enterprises able to achieve a truckload of trading volume. Currently, most market participants are closely watching whether tin prices can effectively break the key level of 250,000 yuan/mt, using this as an important basis for judging future price trends. Until the price direction becomes clearer, the market is expected to maintain the current wait-and-see stance.

Nickel

Spot premiums/discounts: The mainstream premium for Jinchuan #1 nickel was 3,000-3,200 yuan/mt, with an average of 3,100 yuan/mt, unchanged from the previous trading day. The premium for Norilsk nickel was -250-0 yuan/mt, with an average premium of -125 yuan/mt, also unchanged from the previous trading day.

Futures market: On December 10, the tug-of-war between longs and shorts was evident in the morning, with the futures market experiencing wide fluctuations. The midday closing price fell by 330 yuan/mt to 126,800 yuan/mt, a decrease of 0.26%. The SMM #1 refined nickel price dropped by 300 yuan/mt to 128,528 yuan/mt.

Spot market: Following the favourable macro front that boosted nickel prices in the previous day, nickel prices fluctuated in the morning, showing overall weakness. Influenced by the national economic stimulus policies, downstream purchasing sentiment improved over the past two days, with a slight increase in market transactions. Spot premiums/discounts have remained relatively stable at high levels over the past two days. However, due to poor fundamentals, nickel prices faced significant upward resistance.

Price spread with nickel sulphate: The price of nickel briquette was 126,300-127,000 yuan/mt, down 300 yuan/mt from the previous day. The price spread between refined nickel and nickel sulphate was 6,609 yuan/mt.