SMM Morning Comment For SHFE Base Metals November 6

SHANGHAI, November 6(SMM) –SHANGHAI, November 6(SMM) –
Copper
LME copper prices opened at $8118/mt and closed at $8168.5/mt in last Friday evening trading, a decline of 0.13%, with the low-end of $8118/mt and the high-end of $8210/mt. Trading volume was 21,000 lots, and open interest stood at 262,000 lots. The most active SHFE 2312 copper contract prices opened at 67640 yuan/mt and closed at 67360 yuan/mt last evening, down 0.47%, with the high-end of 67310 yuan/mt and the low-end of 67650 yuan/mt. Trading volumes stood at 32,000 lots and open interest stood at 150,000 lots. On the macro front, the U.S. non-farm payrolls increased by 150,000 after seasonally adjustment in October, the smallest increase since June. Market expectations were for 180,000. The total number of new jobs in August and September was 101,000 lower than before the revision. Domestically, Vice Minister of Commerce Sheng Qiuping hosted a roundtable meeting for foreign-invested enterprises in Shanghai and mentioned that restrictions on foreign investment access in the manufacturing sector will be completely lifted. SMM data showed that as of Friday November 3, copper inventory across major Chinese markets stood at 63,700 mt, up 4,800 mt from last Monday and down 4,300 mt from two Fridays ago. The inflow of imported copper in East China replenished spot resources which, coupled with high copper prices at the end of the month, reduced downstream demand and reduced inventories; inventories in South China reached a new low, mainly due to the decline in output of surrounding smelters and the impact of maintenance. In terms of consumption, downstream wait-and-see sentiment has intensified after the copper price rebounded, and demand is expected to weaken. Copper prices are expected to remain rangebound as the market is cautious.
Aluminum
The most-traded SHFE 2312 aluminum contract opened at 19195 yuan/mt at last Friday’s night session, with its low and high at 19160 yuan/mt and 19260 yuan/mt before closing at 19195 yuan/mt, flat from the previous trading day. LME aluminum opened at $2232.5/mt last Friday, with its low and high at $2229.5/mt and $2260/mt respectively before closing at $2256.5/mt, up 0.98%.
The Federal Reserve's pause in rate hikes meets market expectations, yet high inflation abroad raises concerns about weak foreign demand. Despite domestic policy boosts, the industrial chain impact will take time. Fundamentally, Yunnan region's aluminium production cuts have started, relieving future domestic supply pressure. Yet, with poor consumer performance and weak demand, domestic aluminium ingot inventory grew and spot prices maintained discount against SHFE. Soft demand will counteract positive impact from production cuts. Therefore, SHFE aluminium will lack upward momentum.
Lead
Inventory boosted LME lead to a new high in nearly 7 months
SHANGHAI, Nov 6 (SMM) -
LME lead prices opened at $2128/mt last Friday evening. Entering the European session, LME lead stocks unexpectedly dropped. LME lead rose strongly, reaching a maximum of US$2,174/ton, setting a new high in the past month, until it finally closed at US$2,172.5/ton in late trading, an increase of 2.09%.
The most active SHFE 2312 lead contract prices opened at 16670 yuan/mt last Friday evening and finally closed at 16635 yuan/mt, an increase of 0.51%. Open interest increased 141 lots to 16635 lots.
Zinc
SMM Zinc Morning Comment
Last Friday, the U.S. non-farm payrolls increased by 150,000 in October after seasonally adjustment, the smallest increase since June. Market expectations were for 180,000. The total number of new jobs in August and September was 101,000 lower than before the revision. The monthly unemployment rate recorded 3.9%, the highest level since January 2022, and market expectations were 3.8%. After the non-farm data was released, federal funds futures prices showed that the possibility of the Federal Reserve raising interest rates by January next year dropped to less than 20%. Swap market prices show that the Federal Reserve's first interest rate cut is expected to be brought forward to June next year, compared with July next year. Atlanta Fed President Bostic was satisfied with the non-farm payrolls data released on Friday and may support maintaining the current interest rate level for about 8-10 months. Minneapolis Fed President Neel Kashkari: While the slowdown in hiring is good news for the Fed, it doesn’t want to overreact to one month’s data. Richmond Fed President Barkin: Views on whether to raise interest rates again will depend more on the inflation report. Former U.S. Treasury Secretary Summers also warned investors not to rush to declare that the Fed's work is done. Vice Minister of Commerce Sheng Qiuping hosted a roundtable meeting for foreign-invested enterprises in Shanghai and mentioned that restrictions on foreign investment access in the manufacturing sector will be completely lifted.
LME zinc opened at $2471.5/mt last Friday evening and closed up $35/mt or 1.43% at $2515.5/mt. Trading volume decreased to 6298 lots, and open interest increased by 347 lots to 200,000 lots. LME zinc inventory shed by 3625 mt to 78575 mt. The U.S. non-farm payrolls increased by 150,000 in October after seasonally adjustment, the smallest increase since June, increasing market expectations for the end of the Federal Reserve's interest rate hikes. The U.S. dollar fell to recent lows.
The most traded SHFE 2312 opened lower at 21440 yuan/mt and closed at 21400 yuan/mt overnight, down 20 yuan/mt or 0.09%. The trading volume was down to 47767 lots, and open interest added 1071 lots to 86775 lots. The market's continuous poor trading lowered the operating rate of the zinc downstream sector.
Tin
SHFE 2312 tin contract fell to 207090 yuan/mt at last Friday’s night session and then bounced back a little, closing at 208140 yuan/mt, up 0.93%.
During the early trading last Friday, spot premiums and discounts in domestic spot market for various tin ingot brands changed little. Small brand tin ingots were offered at premiums of 300-600 yuan/mt over SHFE 2312 tin contract, versus premiums of 500-800 yuan/mt for delivery brands, premiums of 1000-1200 yuan/mt for Yunxi brand, and discounts of 100-400 yuan/mt for imported brand tin ingots. The price of tin began to rebound last Friday, and the willingness of downstream companies in purchasing goods declined slightly. The spot market transactions were thin on the afternoon of last Friday.
Nickel
On the macro front, the Fed Reserve said in a statement that it will keep key rates unchanged at 5.25-5.50% last Thursday evening. Fed Chair Powell mentioned, "slowing down is giving us I think a better sense of how much more we need to do. If we need to do more." This indicates that the current inflation hasn’t yet reached the desired level of 2%, with the Personal Consumption Expenditures Price Index, a key inflation metric for the Fed, showing a 3.4% year-on-year increase in September, significantly higher than 2%. Therefore, the Fed hasn’t moved towards lowering interest rates. Additionally, last week, the Ministry of State Security mentioned the need to be cautious of "short sellers", "bearish speculators", "fearmongers", and "asset strippers". Due to positive macro sentiment, SHFE nickel rebounded on last Friday. Looking at the fundamentals, social inventories of nickel increased by over 1,000 mt last week. Pure nickel inventories have been increasing since the third quarter. This primarily stems from the continuous increase in production of electrowinning nickel. The new electrowinning nickel are cheaper compared to Norilsk nickel and are of a similar quality, leading to a decline in the competitiveness of Norilsk nickel in the spot market. Consequently, this has resulted in a continuous accumulation of inventories. Additionally, based on SMM research, some domestic nickel plate traders are currently unwilling to continue signing long-term agreements for Norilsk nickel due to the impact of electrowinning nickel. From the demand side, demand remained weak last week, with poor transactions in the spot market. The main reason is the high downstream buying sentiment in September, leading to ample nickel plate stocks in October. Earlier, nickel prices showed a downward trend, causing some downstream buyers to continue bearish on nickel prices. Consequently, with stocks yet to clear and the downstream sentiment staying negative, recent spot market transactions have been dull. In summary, the current nickel fundamentals remain weak, but the overall negative sentiment is easing. Additionally, downstream stocks are expected to decrease, combined with a potential nickel price rebound, leading to potential concentrated purchasing in the future.