SMM Morning Comment For SHFE Base Metals (September 25)

SHANGHAI, Sep 25 (SMM) –

Copper

PBoC Introduced "Policy Package", Copper Prices Reached Two-Month High Overnight [SMM Copper Morning Comment]

Overnight, LME copper opened at $9,749.5/mt, initially dipping to $9,724/mt, then climbing steadily to a high of $9,825/mt near the close, finally settling at $9,821/mt, up 2.92%. Trading volume reached 35,000 lots, and open interest was 280,000 lots. Overnight, the most-traded SHFE copper contract 2410 opened at and hit a low of 77,060 yuan/mt, then rose to a high of 77,500 yuan/mt during the session, and consolidated at the end to close at 77,360 yuan/mt, up 1.36%. Trading volume reached 21,000 lots, and open interest was 95,000 lots. Macro side, yesterday the PBoC introduced a "policy package," announcing rate cuts, RRR cuts, reductions in existing mortgage rates, and lowering the minimum down payment for second homes. It is expected to further cut the RRR by 0.25%-0.5% within the year. For the first time, a monetary policy tool was created to support the stock market. The stimulus policy boosted market confidence in the outlook for international oil demand, leading to a rebound in international oil prices, with copper prices following suit. Additionally, Fed Governor Bowman stated that a cautious approach to further rate cuts would continue, and the possibility of stagnation in anti-inflation progress could not be ruled out. Concerns about the health of the labour market intensified among consumers, with the US consumer confidence index dropping significantly by 6.9 to 98.7, below expectations and marking the largest decline in three years, putting pressure on the US dollar index and benefiting copper prices. Fundamentally, the import volume of copper cathode decreased compared to previous levels, leading to tight spot copper supply. Traders held firm on prices, with spot premiums/discounts rising continuously and expected to remain strong. Meanwhile, as copper prices rose yesterday, downstream buyers actively sought sources, resulting in a hot spot market. Price-wise, copper prices are expected to continue to fluctuate upward today.

Aluminum

Central banks implement loose monetary policies, boosting non-ferrous metals. In the short term, aluminum prices are expected to fluctuate upward due to macro influences [SMM Aluminum Morning Comment]

SMM, Sep 25: Overnight, the most-traded SHFE aluminum 2411 contract opened at 20,065 yuan/mt, reaching a high of 20,170 yuan/mt and a low of 20,035 yuan/mt, closing at 20,105 yuan/mt, up 200 yuan/mt, an increase of 1%. LME aluminum opened the previous trading day at $2,489/mt, with a high of $2,568/mt and a low of $2,483/mt, closing at $2,554/mt, up $68/mt, an increase of 2.73%.

Summary: On the macro front, following the US Fed's 50bp rate cut, the domestic central bank introduced policies as well, entering a monetary easing cycle both domestically and internationally, driving up non-ferrous metal prices. On the fundamentals side, the domestic aluminum market supply side slightly increased, while alumina price showed upward fluctuations due to tight supply. The domestic aluminum cost side remained at a high level. Under the influence of the "September-October peak season," downstream weekly operating rates for aluminum remained stable, with downstream consumption steadily improving. However, caution is needed regarding the negative impact of overseas market tariff hike policies on domestic aluminum processing enterprises. Overall, with favorable macro conditions both domestically and internationally, stable downstream operations during the domestic peak consumption season, and pre-holiday market restocking demand, domestic aluminum inventory is expected to continue declining. In the short term, the aluminum market is expected to maintain an upward fluctuation trend.

Lead

Macro Policies Strongly Support Fundamentals, Lead Prices May Fluctuate Upward [SMM Lead Morning Comment]

Overnight, LME lead opened at $2,054.5/mt. Against the backdrop of lead ingot destocking, coupled with favorable Chinese macro policies, the overall operating focus of LME lead gradually shifted upward, reaching a peak of $2,094.5/mt during the session. By the close, LME lead slightly retreated, finally settling at $2,080.5/mt, up 1.44%.

Overnight, the most-traded SHFE lead 2410 contract opened higher at 16,750 yuan/mt. After the opening, SHFE lead's gains slightly receded, but domestic macro policy continued to ferment, with SHFE lead fluctuating upward, reaching 16,780 yuan/mt, a one-week high. By the close, SHFE lead finally settled at 16,660 yuan/mt, up 0.24%. The open interest was 21,191 lots, down 2,023 lots from the previous trading day.

Macro side, the PBoC made significant moves: RRR cuts, interest rate cuts, reduction of existing mortgage rates, and the introduction of monetary tools to support the stock market. PBoC Governor Pan Gongsheng announced five policy measures to support real estate. The National Development and Reform Commission stated that government bond funds will drive the renewal of over 2 million units of equipment. Additionally, US media reported: Hezbollah in Lebanon demanded Iran attack Israel; Israeli military launched a new round of airstrikes on Hezbollah, claiming to have killed the head of Hezbollah's missile project; Hezbollah attacked Israeli military bases; Lebanese authorities pled with the US to stop Israel.

Fundamentally, with the National Day holiday approaching, downstream lead-acid battery companies are arranging holiday schedules and conducting necessary lead ingot stocking. Meanwhile, primary and secondary lead smelters are actively shipping, with some holders expanding discounts to sell. Lead smelters' finished product inventories and SHFE lead warehouse warrant inventories are both trending downward. In the short term, although pre-holiday stocking by downstream companies is weaker than the same period last year, stocking consumption expectations are evident. Coupled with favorable macro policies, lead prices will continue to show a fluctuating upward trend.

Zinc

Favorable macro policies boost market sentiment, SHFE zinc fluctuates upward [SMM Zinc Morning Comment]

SMM, Sep 25: Overnight, US Fed Governor Bowman took a hawkish stance; US consumer confidence saw its largest drop in over three years; Hezbollah requested Iran to join the fight against Israel; the Bank of Japan's governor reinforced signals of no rush to raise rates; PBOC introduced a new policy "combo"; the state plans to increase core tier-one capital for six large commercial banks; the Financial Regulatory Administration emphasized the importance of loan renewals and improving financial services for small and micro enterprises.

Overnight, LME zinc opened at $2,886/mt, initially dipped to a low of $2,879/mt, then fluctuated upward above the daily average. During European trading, a tug-of-war between longs and shorts led LME zinc slightly below the daily average, but with increased long positions, it quickly rose to around $2,986/mt. In the night session, LME zinc maintained its upward trend, peaking at $3,014/mt, and closed up at $3,010.5/mt, a rise of $125.5/mt or 4.35%. Trading volume increased to 84,146 lots, and open interest rose by 1,802 lots to 239,000 lots. Overnight, LME zinc recorded a large bullish candlestick, with the 20-day moving average providing support. LME social inventory decreased by 1,100 mt to 256,950 mt, a reduction of 0.43%. The US September Conference Board Consumer Confidence Index unexpectedly fell by 6.9 points to 98.7, below expectations and marking the largest drop in three years. However, as China is a major metal consumer, recent favorable policies have boosted the economy, and LME zinc is expected to fluctuate upward today.

Overnight, the most-traded SHFE zinc 2411 contract opened with a gap at 24,150 yuan/mt, initially dipped to 24,090 yuan/mt, then with increased long positions, it rose above the daily average to a high of 24,520 yuan/mt. By the end of the session, profit-taking by longs led SHFE zinc to slightly decline to 24,470 yuan/mt, fluctuating rangebound, and it closed up at 24,475 yuan/mt, a rise of 465 yuan/mt or 1.94%. Trading volume decreased to 98,500 lots, and open interest increased by 4,365 lots to 113,000 lots. Overnight, SHFE zinc recorded a bullish candlestick, with the daily K-line moving upward, the upper Bollinger Band forming resistance, and various moving averages providing support below. The PBOC announced a series of favorable macro policies, including rate cuts, RRR cuts, reductions in existing mortgage rates, and lower minimum down payments for second homes, boosting market sentiment. SHFE zinc is expected to fluctuate upward today.

Tin

During the night session, SHFE tin prices consolidated at high levels, downstream purchasing sentiment in spot market remained sluggish [SMM Tin Morning Comment]

SMM, September 25: In the night session yesterday, the most-traded SHFE tin contract closed at 261,700 yuan/mt, up by 1,140 yuan/mt, an increase of 0.44%, with a high of 263,160 yuan/mt and a low of 260,660 yuan/mt. During the morning session yesterday, trading companies' quotes for domestic tin ingot brands showed little change compared to recent days. Small brand tin ingots were quoted at premiums of 0-500 yuan/mt against the SHFE 2410 contract, delivery brand prices at 200-600 yuan/mt against the SHFE 2410 contract, Yunnan Tin brand at 600-800 yuan/mt against the SHFE 2410 contract, and imported tin brand spot quotes at discounts of 700-200 yuan/mt against the SHFE 2410 contract. Yesterday morning, tin prices fluctuated upward, with most downstream and end-user companies choosing to wait and see. Most trading companies had scattered transactions, with a few trading companies completing transactions of about one truckload. Overall, the spot market transactions were mediocre yesterday.

Nickel

On September 24, Jinchuan nickel was quoted at a premium of 1,700-1,800 yuan/mt, with an average of 1,750 yuan/mt, remaining unchanged from the previous trading day. Norilsk nickel was quoted at a discount of 350-100 yuan/mt, with an average of 225 yuan/mt, down 25 yuan/mt from the previous trading day. On the morning of September 24, the futures market fluctuated, and spot premiums narrowed compared to the previous working day. Nickel briquette prices were 124,250-124,600 yuan/mt, up 975 yuan/mt from the previous trading day. The price spread between nickel briquette and nickel sulphate was approximately 2,213 yuan/mt (nickel sulphate prices were 2,213 yuan/mt higher than nickel briquette prices).