SMM Morning Comment For SHFE Base Metals (Oct 8)

SHANGHAI, Oct 8 (SMM) –

Copper

After the non-farm payrolls data release, the US dollar index rose, putting pressure on copper prices; focus on today's domestic press conference [SMM Copper Morning Comment]

Overnight, LME copper opened at $9,949/mt, initially rose to a high of $9,981/mt, then fluctuated downward to a low of $9,860/mt before climbing to a high of $9,965/mt at the close, and finally settled at $9,952/mt. Trading volume reached 12,000 lots, and open interest reached 300,000 lots. SHFE copper market was closed overnight. Macro side, after the non-farm payrolls data release, the likelihood of a 50 basis point interest rate cut by the US Fed this year decreased. US Fed officials indicated a greater possibility of further rate cuts, but traders expect less than a 50 basis point cut this year. The US dollar index rose significantly, suppressing copper prices. Additionally, sources indicated that Israel would soon retaliate against Iran, and Iran's Tasnim News Agency stated that Iran has prepared 10 plans to respond to potential Israeli attacks, further escalating tensions in the Middle East. Meanwhile, domestically, attention is on today's press conference by the National Development and Reform Commission. Fundamentally, on the last trading day before the holiday, downstream had mostly completed restocking, spot trading was sluggish, and with high copper prices, premiums fell. Copper cathode inventory began to build up again. The market is now focused on post-holiday developments, with expectations of a slight inventory build-up after the National Day holiday, and premiums are expected to be more likely to fall than rise. As of Monday, September 30, SMM copper stocks in major regions increased by 11,200 mt to 165,500 mt compared to last Thursday, ending the continuous destocking trend and increasing again. Overall, with accelerated growth in the US in September and a rising US dollar index, copper prices are under pressure. Although domestic consumption is restrained by copper prices, the market remains optimistic about domestic demand prospects due to multiple favorable policies, providing bottom support for copper prices. Copper prices are expected to remain high today. Notably, at 10 a.m. today, the State Council Information Office will hold a press conference, where the director and deputy director of the National Development and Reform Commission will introduce the implementation of a package of incremental policies.

Aluminum

During the holiday, overseas macro sentiment fluctuated, with LME aluminum consolidating at high levels. Post-holiday, attention should be paid to changes in domestic consumption [SMM Aluminum Morning Meeting Comment]

Before the holiday, namely on September 30, the most-traded SHFE aluminum 2411 contract opened at 20,355 yuan/mt, with bears reducing positions, reaching a high of 20,635 yuan/mt, a low of 20,330 yuan/mt, and closing at 20,460 yuan/mt, up 105 yuan/mt, an increase of 0.52%. Yesterday (October 7), LME aluminum opened at $2,622.5/mt, with a high of $2,669/mt, a low of $2,641.5/mt, and closed at $2,654/mt, down $9.5/mt, a decrease of 0.36%.

Summary: On the macro front, during the holiday, with the release of major overseas macro data, the market adjusted expectations for a significant US Fed interest rate cut. The US dollar index fluctuated upward, and overseas macro sentiment was slightly volatile. However, intensive domestic macro policies continued to strongly support the aluminum market. On the fundamentals, domestic aluminum market supply slightly increased, and the reduction expectation in Yunnan decreased. On the cost side, the spot alumina market remained in tight balance, making domestic aluminum costs more likely to rise than fall. On the demand side, during the domestic holiday, most large and medium-sized downstream processing enterprises maintained normal operations. Post-holiday, demand in sectors such as new energy and photovoltaics remained positive, boosting future aluminum consumption expectations. Overall, in the short term, with a favorable macro atmosphere and stable fundamentals, the aluminum market is expected to hover at highs. Continued attention is needed on post-holiday domestic consumption and changes in macro sentiment both domestically and abroad.

Lead

Macro boost combined with consumption expectations, lead prices continue to fluctuate upward [SMM Lead Morning Comment]

Overnight, LME lead opened at $2,156/mt, rose slightly during the Asian session, and consolidated around the daily moving average in the European session, reaching a high of $2,167/mt before fluctuating downward, finally closing at $2,153/mt, up $3/mt, an increase of 0.14%.

Overnight, SHFE lead was closed due to the National Day holiday. During the holiday week (9.30-10.4), LME lead opened at $2,126/mt and closed at $2,150/mt, up $38.5/mt, an increase of 1.82%.

Macro side, during the holiday, on October 4, the US Department of Labor released the latest non-farm payrolls report. The US September non-farm payrolls data exceeded expectations, weakening market enthusiasm for the US Fed to cut interest rates by 50 basis points in October. The Middle East situation escalated again—on the evening of October 1 local time, Iran launched a large-scale ballistic missile attack on Israel.

Fundamentals side, the spread between futures and spot prices for lead ingots widened, with some regions quoting ex-factory prices at discounts of 300-250 yuan/mt against the SHFE 2410 contract, increasing the willingness of holders to deliver to warehouses. Pre-holiday, there were already actions to transfer and deliver to warehouses, causing social inventory of lead ingots to stop declining and start rising. Except for a few battery companies that took early holidays, most lead-acid battery companies completed their holiday stocking and entered a 2-5 day holiday, resuming production in the latter half of the week. However, compared to the same period in 2023, downstream pre-holiday stocking enthusiasm was relatively low, and most lead smelters did not pre-sell most of their holiday production as in previous years. Spot market supply was relatively ample, and post-holiday attention is needed on macro policy boosts, downstream consumption, and restocking to see if it alleviates the inventory pressure accumulated during the holiday.

Zinc

Interest Rate Cut Expectations Resurface, LME Zinc Fluctuates at High Levels [SMM Zinc Morning Comment]

Overnight, US Fed's Muserlem: Further interest rate cuts are likely; Sources: Israel will soon retaliate against Iran; It is reported that Iran has prepared 10 plans to counter potential Israeli attacks; US State Department: Israel is expected to strike Hezbollah in accordance with international humanitarian law; FTSE China A50 futures open interest reached a record high; During the National Day holiday, the number of new accounts opened by major securities firms hit a historical high; On the eve of the A-share market opening, several funds hit daily upside ceiling. Overnight, LME zinc opened at $3,175/mt, initially fluctuating widely along the daily moving average, dipping to $3,155/mt, then bulls increased positions, pushing LME zinc higher during European trading hours to a peak of $3,189/mt, continuing to fluctuate widely along the daily moving average, and finally closing up at $3,180/mt, up $9.5/mt, an increase of 0.3%. Trading volume decreased to 7,883 lots, and open interest increased by 1,607 lots to 260,000 lots. Overnight, LME zinc recorded a bullish candlestick, with LME inventory decreasing by 1,225 mt to 244,100 mt, a drop of 0.5%. US further interest rate cut expectations have risen again, and domestic policy support remains, with LME zinc fluctuating at high levels, expected to fluctuate today.

Tin

Before the holiday, SHFE tin prices fluctuated at high levels, and spot market transactions were sluggish [SMM Tin Morning Comment Oct 8]

SMM, October 8: Before the holiday, the closing price of the most-traded SHFE tin contract was 265,160 yuan/mt, up by 7,780 yuan/mt, an increase of 3.02%, with a high of 266,560 yuan/mt and a low of 257,400 yuan/mt. During the early trading session before the holiday, trading companies' quotes for domestic tin ingot brands showed little change in premiums and discounts 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 were quoted at premiums of 200-700 yuan/mt against the SHFE 2410 contract, Yunnan Tin brand was quoted at premiums of 600-900 yuan/mt against the SHFE 2410 contract, and imported tin brands were quoted at discounts of 400-200 yuan/mt against the SHFE 2410 contract. During the early trading session before the holiday, tin prices fluctuated at high levels, and with previous restocking being sufficient, buying interest was low. Overall, the spot market transactions on the last day before the holiday were mediocre.

Nickel

On September 30, Jinchuan nickel was quoted at a premium of 1,300-1,500 yuan/mt, with an average of 1,400 yuan/mt, down 350 yuan/mt from the previous trading day. Norilsk nickel was quoted at a discount of 600-200 yuan/mt, with an average of 400 yuan/mt, down 150 yuan/mt from the previous trading day. On the morning of September 30, the futures market was significantly boosted by the macro front, and the spot premium spread continued to widen. Nickel briquette prices were 131,200-131,500 yuan/mt, up 3,775 yuan/mt from the previous trading day. The price spread between nickel briquette and nickel sulphate was about 4,282 yuan/mt (nickel sulphate prices were 4,282 yuan/mt lower than nickel briquette prices).