SMM Morning Comment For SHFE Base Metals On January 7

SHANGHAI, January 7 (SMM) –

Copper

Overnight, LME copper opened at $8,891/mt, initially dipped to $8,872/mt, then surged during the session to a high of $9,076/mt. It slightly pulled back at the close, finally settling at $8,966/mt, up by 0.82%. Trading volume reached 28,000 lots, and open interest stood at 282,000 lots. Overnight, the most-traded SHFE copper 2502 contract opened at 74,530 yuan/mt, initially climbed to 74,680 yuan/mt, then declined to a low of 74,250 yuan/mt during the session. It rebounded and consolidated sideways at the close, finally settling at 74,500 yuan/mt, up by 1.14%. Trading volume reached 50,900 lots, and open interest stood at 148,000 lots. Macro side, the US dollar index plunged sharply as US media reported that Trump would impose universal tariffs only on key imported goods, driving copper prices higher. However, Trump later posted on social media denying the reports of scaled-back tariff policies, leading to a rebound in the US dollar index, which limited copper price gains. Fundamentally, the market supply of copper cathode remained tight, with imported sources mainly consisting of non-registered and wet-process materials. As of Monday, January 6, SMM copper inventories in major regions across China increased by 1,500 mt compared to last Thursday, reaching 115,800 mt. Total inventories were 42,900 mt higher than the 72,900 mt recorded in the same period last year. This week, due to the beginning of the year, downstream enterprises are expected to have ample funds, likely boosting operating rates and leading to a reduction in weekly inventories. On prices, US Fed Governor Cook stated that interest rate cuts could be approached more cautiously. Additionally, multiple Fed officials are scheduled to speak, and economic data will be released this week. The US dollar index is expected to remain strong, and resistance for copper prices persists.

Aluminum

Futures Market: Overnight, the most-traded SHFE aluminum 2502 contract opened at 19,630 yuan/mt, hit a high of 19,725 yuan/mt, a low of 19,615 yuan/mt, and closed at 19,660 yuan/mt, down 10 yuan/mt or 0.05%. Yesterday, LME aluminum opened at $2,496/mt, reached a high of $2,514.5/mt, a low of $2,477/mt, and closed at $2,491.5/mt, down $2.5/mt or 0.10%.

Summary: On the macro front, the Chinese government continues to boost consumption, while regional conflicts remain unresolved. 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 fundamentals side, supply-side pressure has slightly eased, but weak demand during the off-season and the risk of inventory buildup in social stocks persist. In the short term, aluminum prices are expected to fluctuate downward. In the long term, attention should be paid to the US Fed's future stance on interest rate cuts and changes in the pace of consumption recovery.

Lead

Overnight, LME lead opened at $1,925/mt, briefly touching a low of $1,924/mt before fluctuating upward. During the European session, LME lead reached a high of $1,955.5/mt and finally closed at $1,947.5/mt, up 1.38%.

Overnight, the most-traded SHFE lead 2502 contract opened higher with a gap at 16,795 yuan/mt, then fluctuated downward to a low of 16,705 yuan/mt. Supported by the rise in the US dollar, it rebounded and closed at 16,750 yuan/mt, up 0.09%.

Macro side, Trump posted on social media that the report by The Washington Post regarding tariff policy reductions was false. The US Congress officially certified Trump as the elected president. The final value of the US December S&P Global Services PMI was 56.8, higher than the previous value of 58.5. China's National Financial Regulatory Administration issued the "Administrative Measures for Margin Management of Non-Centralized Clearing Derivatives Transactions by Financial Institutions." Two departments announced that by 2027, the national new energy utilization rate should not be less than 90%.

Spot fundamentals, downstream enterprises are currently in the pre-Chinese New Year stockpiling period, with some purchasing as needed. After the supply of mainstream lead ingot production areas decreased, downstream enterprises turned to consuming lead ingots from nearby warehouses, leading to an expanded decline in social inventory. Currently, the haze warning in Henan has been lifted, and attention will shift to the production dynamics of enterprises in Anhui. Meanwhile, the pre-holiday stockpiling expectations of downstream enterprises remain, and the decline in lead ingot social inventory may continue.

Zinc

Trump: Reports on the reduction of tariff policies are untrue; Canadian Prime Minister Justin Trudeau announced his resignation as leader of the Liberal Party; US Fed Governor Cook: More cautious measures can be taken regarding interest rate cuts; A bomb explosion occurred in central India; Two departments: By 2027, the national new energy utilization rate will not be less than 90%; The National Financial Regulatory Administration issued the "Administrative Measures for Margin Management of Non-Centralized Clearing Derivatives Transactions by Financial Institutions."

Overnight, LME zinc opened at $2,895/mt. At the beginning of the session, LME zinc fluctuated around the daily moving average, briefly dipping to $2,872/mt before quickly rebounding to an intraday high of $2,934/mt. Zinc prices then pulled back below the daily moving average, ultimately closing higher at $2,895/mt, up $3.5/mt or 0.12%. Trading volume decreased to 12,259 lots, and open interest fell by 812 lots to 220,000 lots. Overnight, LME zinc recorded a doji candlestick, with the lower Bollinger Band forming resistance. LME zinc inventory decreased by 1,175 mt to 229,150 mt, down 0.51%. The US dollar index weakened, and although LME zinc's intraday losses were partially recovered, the rebound was limited. Attention should be paid to a series of upcoming economic data releases.

Overnight, the most-traded SHFE zinc 2502 contract opened at 24,670 yuan/mt. After the opening, SHFE zinc briefly rose to a high of 24,760 yuan/mt before trending downward, hitting an intraday low of 24,515 yuan/mt. Subsequently, SHFE zinc's center remained basically stable, fluctuating within a narrow range, and ultimately closed higher at 24,530 yuan/mt, up 40 yuan/mt or 0.16%. Trading volume decreased to 75,522 lots, and open interest fell by 526 lots to 109,000 lots. Overnight, SHFE zinc recorded a bearish candlestick, with support provided by the lower Bollinger Band. According to SMM, zinc inventory as of Monday fell by 2,800 mt WoW to 61,700 mt, remaining at a low level. Despite a significant increase in zinc concentrate TCs, domestic smelters still have cost support, temporarily easing SHFE zinc's downward trend, with its center showing a slight rebound.

Tin

SHFE tin prices fluctuated downward during the daytime yesterday, with overall prices slightly declining. During the night session, prices moved downwards after a higher opening, gradually pulling back to daytime levels. Overall, SHFE tin prices remained at a relatively high level yesterday. Spot market prices followed SHFE tin prices with wide fluctuations, but the overall premium and discount levels remained largely unchanged. Yunnan Tin maintained a premium of 1,000 yuan/mt against SHFE tin prices, while deliverable tin ingots had a premium of around 600 yuan/mt against SHFE tin prices. Imported tin ingots, however, were at a discount of around 700 yuan/mt against SHFE tin prices. Tight spot supply of imported tin ingots persisted in the spot market, with only a few traders holding imported tin spot cargoes, while most traders were selling imported tin futures. Some imported tin is expected to arrive at ports this week, but considering that part of the imported tin ingots has been pre-sold, the available quantity of imported tin for sale will remain at a low level after this week's arrivals.

Nickel

Spot Premiums/Discounts: Mainstream spot premiums for Jinchuan No. 1 nickel were quoted in the range of 3,500-3,600 yuan/mt, with an average premium of 3,550 yuan/mt, up by 350 yuan. Russian nickel premiums were quoted in the range of -100 to 100 yuan/mt, with an average of 0 yuan/mt, unchanged from the previous trading day.

Futures: In the morning, nickel prices fell by 0.21%, down 260 yuan to 122,660 yuan.

Overall, average premiums rose slightly. Demand side, entering January, as some downstream enterprises completed restocking in mid-to-late December, the recent market has been relatively sluggish. Supply side, top-tier enterprises have no plans for production cuts in January, and overall supply remains sufficient. With a relatively loose supply-demand balance, nickel prices are expected to fluctuate downward in the short term.

Nickel Sulphate Price Spread: Nickel briquette prices were 122,400-122,800 yuan/mt, up by 475 yuan/mt from the previous trading day's spot prices. Nickel sulphate remains at a discount to refined nickel.