SMM Morning Comment For SHFE Base Metals On January 2

SHANGHAI, January 2 (SMM) –

Copper

Overnight, LME copper opened at $8,855/mt, initially reaching a high of $8,883/mt before trending downward, hitting an intraday low of $8,757/mt. It then fluctuated slightly towards the close, finally settling at $8,781.5/mt, with open interest reaching 263,000 lots. SHFE copper was closed for the holiday. Macro side, the US Fed maintained high interest rates, and the US dollar index reached a two-year high, weighing on copper prices. Domestically, starting January 1, personal housing provident fund loan interest rates were lowered. Fundamentals side, pre-holiday market trading was noticeably quiet, with both quotations and inquiries inactive, but a certain recovery is expected post-holiday. Overall, post-holiday consumption is expected to improve to some extent, but with the US dollar at a two-year high, copper prices are likely to face limited upside today.

Aluminum

Futures Market: On Tuesday, the most-traded SHFE aluminum 2502 contract opened at 19,765 yuan/mt, hitting a high of 19,835 yuan/mt and a low of 19,755 yuan/mt, before closing at 19,780 yuan/mt, up 15 yuan/mt or 0.08%. On the same day, LME aluminum opened at $2,550/mt, reached a high of $2,562.5/mt and a low of $2,537/mt, and closed at $2,552.5/mt, up $2.5/mt or 0.10%.

Summary: On the macro front, the pace of interest rate cuts by the European Central Bank and the US Fed may slow, putting continued pressure on base metals. On the fundamentals side, although multiple aluminum smelters in Sichuan and Guangxi reduced production in December, and some capacity resumption progress stalled, production still showed YoY growth. On the demand side, market demand continued to weaken during the off-season, with operating rates in the aluminum processing industry declining steadily, and some aluminum processing plants nearing holiday shutdowns. Overall, on the macro front, the US Fed's interest rate cut pace remains unclear, and the European Central Bank's rate cuts are delayed. On the fundamentals side, although supply-side pressure has slightly eased, weak demand during the off-season and the risk of inventory buildup in social stocks continue to grow. In the short term, aluminum prices are expected to fluctuate downward.

Lead

Overnight, both LME lead and SHFE lead were closed for the New Year's Day holiday.

Macro side, the US dollar index consolidated at a high level as traders continued to price in the possibility of fewer interest rate cuts by the US Fed in 2025. Fundamentals side, pre-holiday trading volumes were thin, and lead ingot supply remained locally tight, with smelters maintaining premiums and being reluctant to sell. After the New Year's Day holiday, as year-end account settlements and inventory checks conclude, dealers are expected to gradually fulfill their pre-Chinese New Year procurement plans, and downstream just-in-time procurement demand is likely to be released. Lead prices may see a potential bottoming-out and rebound.

Zinc

On Tuesday, Musk briefly triggered a surge of 126,000% in related meme coins; Israeli Defense Minister: Hamas may face an unprecedented massive strike in Gaza; South Korea's CIO Director: Will arrest Yoon Suk-yeol within the validity period of the arrest warrant; Gazprom: Has suspended natural gas supply to Europe via Ukraine; Iran to hold a new round of talks with the UK, France, and Germany on January 13; Starting January 1, personal housing provident fund loan interest rates have been lowered; Three departments issued the "Interim Measures for Implementing a Flexible Retirement System"; Mixue Bingcheng Co., Ltd. submitted a listing application to the Hong Kong Stock Exchange; Alibaba sold Sun Art Retail for HK$13.1 billion, further shrinking its new retail footprint.

On Tuesday, LME zinc opened at $3,020/mt. In early trading, LME zinc fluctuated and consolidated near the daily moving average. Later, the center moved upward, reaching a high of $3,042/mt. During European trading hours, bulls reduced positions, and LME zinc declined, fluctuating and consolidating at $3,025/mt. In the night session, bears increased positions, causing LME zinc to plunge and hit a low of $2,968.5/mt, eventually closing down at $2,989/mt, a decrease of $28/mt or 0.97%. Trading volume fell to 5,839 lots, and open interest increased by 167 lots to 224,000 lots. On Tuesday, LME zinc recorded a large bearish candlestick. LME inventory decreased by 2,975 mt to 234,900 mt, a drop of 1.25%. The US dollar remained strong, with the market holding positive expectations for fewer interest rate cuts and favorable policies under the new president. The US dollar index continued to hover near a two-year high. Meanwhile, China's PMI recorded 50.1, still in expansion territory, but concerns about a pullback in domestic demand persisted. LME zinc's center shifted downward, and it is expected to fluctuate mainly today.

On Tuesday, SHFE zinc was closed for the New Year holiday.

Tin

On the previous trading day, SHFE tin futures prices showed a clear pullback trend. SHFE tin prices began to fluctuate but maintained an overall downward trend. During the trading session, SHFE tin futures prices once pulled back to 243,000 yuan/mt, indicating a retreat of bullish forces and significant entry of bearish positions. However, prices later rebounded slightly, possibly due to profit-taking by some bearish investors. By the close, the price of the most-traded SHFE tin futures contract settled at 245,000 yuan/mt. From a technical analysis perspective, various indicators for SHFE tin futures prices weakened, suggesting insufficient upward momentum in the future. However, considering the approach of the year-end, the spot market is gradually tightening, which may provide some support for SHFE tin. Nevertheless, investors should closely monitor market dynamics to guard against potential risks. Overall, the SHFE tin futures market performed weakly, with prices pulling back to previous levels. Supported by both fundamentals and technical factors, the market's outlook for SHFE tin leans more towards maintaining a volatile trend. Investors are advised to remain cautious and adjust strategies flexibly based on actual conditions.

Nickel

Spot Premiums/Discounts: The quotations reflect the contract rollover, with the most-traded contract changing to 2502. The mainstream spot premium quotation range for Jinchuan Nickel was 2,800-3,200 yuan/mt, with an average premium of 3,000 yuan/mt. The quotation range for Russian Nickel was -200 to 200 yuan/mt, with an average premium of 0 yuan/mt.

Futures: In the morning, nickel prices fluctuated downward at low levels, dropping 30 yuan to 124,420 yuan, down 0.02%.

The overall premium for Jinchuan Nickel continued to drop slightly. With increasing supply, short-term premiums are expected to decline further. Spot premiums/discounts for nickel plates of other brands remained largely stable this month. As year-end approaches, overall market transactions were sluggish.

Price Spread With Nickel Sulphate: Nickel briquette prices were 123,400-124,050 yuan/mt, down 75 yuan/mt from the previous trading day. Nickel sulphate remained at a discount to refined nickel.