SMM Morning Comment For SHFE Base Metals December 19

SHANGHAI, December 19 (SMM) –
Copper
LME copper prices opened at $8518/mt and closed at $8531/mt in overnight trading, a drop of 0.65%, with the low-end of $8456/mt and the high-end of $8545/mt. Trading volume was 14,000 lots, and open interest stood at 288,000 lots. The most active SHFE 2401 copper contract prices opened at 68520 yuan/mt and closed at 68410 yuan/mt last evening, down 0.25%, with the high-end of 68580 yuan/mt and the low-end of 68360 yuan/mt. Trading volumes stood at 14,000 lots and open interest stood at 136,000 lots. On the macro front, Cleveland Fed President Mester said that the market's expectations for an interest rate cut are "slightly ahead" of the Fed. The key to the next stage is how long monetary policy needs to remain tight, which will have a certain impact on the market's expectations of interest rate cuts. On fundamentals, As of Monday December 18, SMM copper inventory across major Chinese markets increased 300 mt from last Friday to 63,300 mt, down 18,600 mt YoY. The inventory decline in East China was more obvious, mainly due to the heavy snow weather leading to a reduction in the arrival volume of some warehouses, and the downstream pickup volume also increased after the delivery of the SHFE front-month contract; the inventory increase in South China is mainly due to poor downstream consumption, and more shipments from smelters before delivery. In terms of consumption, if copper prices do not rise further, it is expected that the demand can improve. In addition, Chile's state mining company said it had reached an agreement with three unions to reduce the risk of strikes. Copper prices will have limited upward room.
Aluminum
Overnight, the most-traded SHFE 2401 aluminum contract opened at 18950 yuan/mt, with its low and high at 18885 yuan/mt and 18980 yuan/mt before closing at 18925 yuan/mt, up 15 yuan/mt or 0.08%. LME aluminum opened at $2240.5/mt yesterday, with its high and low at $2286/mt and $2233/mt respectively before closing at $2282/mt, up 1.83%.
On the macro front, the Federal Reserve decided to keep the benchmark interest rate unchanged at the range of 5.25%-5.50% at its December meeting, in line with market expectations. The overall performance of domestic social financing data was good, and financial support for the real economy was strong. The credit structure has improved, and the macroeconomic atmosphere at home and abroad has improved, boosting market confidence. In terms of fundamentals, the supply side has entered a period of stable operation in the short term, but we still need to be wary of the risks of reductions in aluminum production capacity caused by extreme weather and power rationing in the heating season. On the demand side, some aluminum processing industries have started to pick up slightly. The market in the off-season seems to be less sluggish than usual thanks to year-end promotions in some end-use sectors. Delays in domestic aluminum ingot transportation and active downstream replenishment drove domestic aluminum ingot social inventories to be significantly reduced, which have fallen below 500,000 mt. In the short term, the supply of aluminum ingots in circulation is tight, and the macro atmosphere has improved, and some terminal sectors have also picked up, keeping front-month contract price firm.
Lead
Overnight, LME lead opened at US$2,079/ton. LME lead stocks turned to growth, increasing by more than 2,000 tons. The contract finally closed at $2,051.5/ton, a decrease of 1.13%.
Overnight, the most active SHFE 2402 lead contract opened at 15,795 yuan/ton. It once reached 15,810 yuan/ton at the beginning of the session and was dragged down by the decline of LME lead. The contract finally closed at 15,620 yuan/ton, a decrease of 0.26%; open interest reached 53,930 lots, an increase of 3,493 lots from the previous trading day.
Zinc
Last evening, LME zinc prices opened at $2529/mt and went up to close at $2538.5/mt, up $7/mt or 0.28%. Trading volume decreased to 9728 lots, and open interest increased 1241 lots to 205,000 lots. LME zinc inventory decreased by 2525 mt to 205950 mt, a drop of 1.21%. Inventories continue to be reduced and macro dovish sentiment continues.
Tin
SHFE 2401 tin contract fell to 206500 yuan/mt overnight, closing at 206600 yuan/mt, down 0.4%.
Yesterday, spot premiums and discounts in domestic spot market for various tin ingot brands were as below. Small brand tin ingots were offered at premiums of 0-300 yuan/mt over SHFE 2401 tin contract, versus premiums of 200-800 yuan/mt for delivery brands, premiums of 800-1100 yuan/mt for Yunxi brand, and discounts of 600-1000 yuan/mt imported brand tin ingots. Tin prices rebounded after a slight decline yesterday, and traders reported that downstream companies' purchasing willingness has increased.
Nickel
Overnight, the most-traded SHFE nickel contract opened at 133,540 yuan/mt, and closed at 133,390 yuan/mt, up 1310 yuan/mt. Trading volume rose 1,020 lots, and open interest decreased by 7,136 lots. At the macro level, the range of interest rate for December remained unchanged by US Fed and it is expected that the US Fed will lower interest rate for three times next year. On fundamentals, affected by significant price reduction of nickel sulphate and other factors, it is now profitable to produce refined nickel using nickel sulphate. It is expected to see the supply growth of refined nickel in December.