SMM Morning Comment For SHFE Base Metals October 31

Copper

LME copper opened at $8190/mt on Monday, with its session low and high at $8107.5/mt and $8231/mt before closing up 0.59% at $8138.5/mt. Trading volume was 42,000 lots, and open interest was 269,000 lots. SHFE 2312 copper contract opened at 67810 yuan/mt overnight, with its session high and low at 67830 yuan/mt and 67230 yuan/mt before closing up 0.16% at 67390 yuan/mt. Trading volume was 38,000 lots, and open interest was 158,000 lots.
On the macro front, Germany’s initial adjusted CPI annual rate in October was 3%, the lowest since June 2021. Germany's inflation rate slowed down significantly in October, and the effects of the European Central Bank's interest rate hikes began to show. Germany's third-quarter GDP shrank by 0.1% from the initial estimate. The U.S. Treasury Department cut its Q4 borrowing forecast to $776 billion. This contrasts with recent data showing a rapidly widening fiscal deficit. In terms of fundamentals, as of Monday October 30, copper stocks in mainstream areas of China decreased by 9,100 mt from last Friday to 58,900 mt, a new low this year, and 33,000 mt lower than the same period last year. The recent downstream operating rates in East China are at a high level during the year, and smelters have increased shipments directly to downstream buyers, so inventories have dropped significantly. Although inventories in South China have also continued to decline, the decline has slowed down. In terms of consumption, rising copper prices and tightening cash flows towards the end of the month, may dent demand. In terms of price, the market expects that the Fed to suspend interest rate hikes, allowing copper prices to rebound slightly.

Aluminum

Overnight, the most-traded SHFE 2312 aluminum contract opened at 19270 yuan/mt, with its low and high at 19195 yuan/mt and 19305 yuan/mt before closing at 19225 yuan/mt, up 30 yuan/mt or 0.16%. LME aluminum opened at $2224/mt on Monday, with its low and high at $2221.5/mt and $2224/mt respectively before closing at $2263.5/mt, up $38/mt or 1.71%.

There is still great uncertainty in overseas macro front. U.S. economic data shows that the U.S. economy is resilient. The U.S. dollar index fluctuates at a high level, suppressing commodities. China has announced to issue an additional one trillion yuan of local government bonds, which could boost the economy and market. In terms of fundamentals, some aluminum billet factories have recently reduced production, the industry's ingot casting volume has increased month-on-month. There are expectations for production reduction by aluminium smelters in Yunnan. The domestic aluminum supply will remain high in short-term. And imported ingots continue to enter China. Downstream consumption is switching from peak season to off-season. Destocking of aluminum ingot social inventory is not smooth. In the short term, aluminum prices may remain rangebound. We need to pay attention to domestic aluminum inventories and downstream consumption in the future.

Lead

LME lead opened at $2105/mt on Monday, with a high of $2138/mt before closing at $2114/mt, an increase of 0.52%. The most-traded SHFE 2312 lead contract opened at 16340 yuan/mt overnight, with high and low at 16360 yuan/mt and 16255 yuan/mt before closing down 0.09% at 16285 yuan/mt.

Zinc

The U.S. Treasury Department cut its Q4 borrowing forecast to $776 billion. The Eurozone economic sentiment index changed little in October; the Chinese Ministry of Finance guided the long-term and steady investment of insurance funds; China will announce the official October manufacturing PMI today, which may be unchanged at 50.2. LME zinc opened at $2457/mt on Monday, with high and low at $2486/mt and $2457/mt, closing at $2466.5/mt, up 0.02%. Trading volume fell 1161 lots to 5968 lots, and open interest fell 880 lots to 200,000 lots, LME zinc inventory rose 5085 mt to 81600 mt. The U.S. Treasury Department unexpectedly lowered its net borrowing forecast for this quarter. However, the plunge in crude oil combined with the U.S. Dallas Fed Business Activity Index recorded -19.2 in October, as well as rising LME zinc inventories sent LME zinc prices down in European session. Overnight, the SHFE-traded SHFE 2312 zinc contract opened at 21305 yuan/mt, with high and low at 21360 yuan/mt and 21105 yuan/mt before closing at 21145 yuan/mt, down 125 yuan/mt or 0.59%. Trading volume fell 81302 lots to 64,200 lots, and open interest fell 3559 lots to 80,700 lots. From a fundamentals perspective, SMM data shows zinc inventories in seven major regions in China increased by 2,100 mt from October 27 to 99,000 mt. Downstream demand was relatively poor. The lackluster fundamentals provided little support for zinc prices. We need to pay attention to China official manufacturing PMI to be released today.

Tin
SHFE 2312 tin contract fell to 214670 yuan/mt overnight and closed at 213600 yuan/mt, down 0.51%.
Yesterday, spot premiums and discounts in domestic spot market for various domestic tin ingot brands changed little. Small brand tin ingots were offered at premiums of 0-300 yuan/mt, versus premiums of 300-700 yuan/mt for delivery brands, premiums of 900 yuan/mt for Yunxi brand, and discounts of 600 yuan/mt for imported brand tin ingots. Tin prices continued to rise yesterday, and the sentiment of downstream companies in purchasing goods was still sluggish. The spot market transactions were still bleak.

Nickel

Overnight, the most-traded SHFE nickel contract opened at 146750 yuan/mt, and closed at 146470 yuan/mt, up 510 yuan/mt. Trading volume rose 61080 lots, and open interest increased by 49311 lots. On the macro front, the current market expectations for US interest rate hike in November continue to cool down, and the U.S. dollar index has remained high recently. We need to pay attention to the Federal Reserve’s interest rate decision this Thursday. From a fundamental perspective, the trend of pure nickel inventory accumulation remains unchanged, downstream demand has not yet improved, and spot market transactions were still weak yesterday. Nickel price is expected to move rangebound.