SMM Morning Comment For SHFE Base Metals On November 5

SHANGHAI, November 5 (SMM) –

Copper

LME copper opened at $9,637.5/mt overnight, with the initial focus dipping to $9,617/mt. It then fluctuated upward, reaching a high of $9,717.5/mt during the session. The price slightly dropped back and maintained a fluctuating trend towards the end, finally closing at $9,676/mt, up 1.44%. The trading volume reached 20,000 lots, and the open interest was 273,000 lots. The most-traded SHFE copper 2412 contract opened at 77,060 yuan/mt overnight, initially dipping to 76,960 yuan/mt. It then fluctuated upward, reaching a high of 77,650 yuan/mt. Towards the end, the price slightly dropped back and maintained a fluctuating trend, finally closing at 77,390 yuan/mt, up 0.52%. The trading volume reached 43,000 lots, and the open interest was 169,000 lots. Macro side, with the US election approaching, Harris is slightly ahead in swing states, and the "Trump trade" is fading. The weakening US dollar index has boosted copper prices. Additionally, OPEC+ decided to delay its production increase plan by one month. OPEC Secretary General stated that peak oil demand will not occur, and the growth continues in the world, leading to a jump in oil prices, which also supported copper prices to some extent. Fundamentally, the arrivals of imported copper remain large this week, maintaining ample supply, but consumption has not significantly improved. Overall, copper prices are expected to have bottom support before the US election concludes.

Aluminum

Futures: The most-traded SHFE aluminum 2412 contract opened at 20,820 yuan/mt overnight, reaching a high of 20,845 yuan/mt and a low of 20,785 yuan/mt, closing at 20,830 yuan/mt, up 130 yuan/mt from the previous close, a decrease of 0.63%. The trading volume was 37,000 lots, and the open interest was 190,000 lots, with a daily reduction of 488 lots. LME aluminum opened at $2,601/mt, reaching a high of $2,630/mt and a low of $2,595.5/mt, closing at $2,621/mt, up $18/mt, an increase of 0.69%.

Summary: On the macro front, the US Fed's expectations for another interest rate cut have strengthened, global liquidity remains ample, and the Chinese government continues to boost consumption. The escalating hot war situation provides support for gold and commodity prices. On the fundamentals side, domestic aluminum social inventory has been continuously destocking due to transportation impacts, falling below the 600,000 mt mark. Alumina spot supply remains tight, and some companies' production cuts and suspensions have caused disruptions, keeping alumina prices fluctuating upward, providing strong support for aluminum prices on the cost side. Overall, domestic aluminum remains in a low inventory and high-cost state, and short-term aluminum prices may fluctuate upward.

Lead

Overnight, LME lead opened at $2,049/mt. During the Asian session, it fluctuated upward to a high of $2,070.5/mt. However, due to the US dollar index's rebound and longs reducing positions, LME lead plunged during the European session, hitting a low of $2,030/mt at the close and finally settling at $2,037/mt, down 0.07%.

Overnight, the most-traded SHFE lead 2412 contract opened at 16,810 yuan/mt. It initially fell to a low of 16,770 yuan/mt before rebounding, reaching a high of 16,875 yuan/mt at the close and finally settling at 16,830 yuan/mt, up 0.18%.

Macro side, the Standing Committee of the National People's Congress reviewed the State Council's proposal to increase the local government debt limit to replace existing implicit debts. According to preliminary monthly data from the China Passenger Car Association, wholesale sales of new energy passenger vehicles in October were estimated at 1.4 million units, up 58% YoY and 14% MoM; Tesla's sales in China declined. The Ministry of Commerce stated that to protect the development interests of the EV industry and global green transition cooperation, China has decided to file a lawsuit against the EU's final anti-subsidy measures.

Fundamentals, the smog alert in Henan has been lifted, and vehicle transportation has returned to normal. In Anhui, an orange alert for air pollution was issued last Friday, and some secondary lead smelters have suspended production for maintenance. The lead-acid battery market consumption has relatively improved, and producers are more willing to operate. Notably, the automotive battery sector has seen a seasonal increase in domestic vehicle and replacement demand, along with a recovery in export orders. The operating rate of major enterprises' production lines has generally increased to 80-100%. In the short term, lead prices may fluctuate upward.

Zinc

Overnight, LME zinc opened at $3,073/mt. In early trading, LME zinc fluctuated upward, reaching a high of $3,104/mt during European trading hours. Subsequently, with bulls reducing positions, LME zinc fluctuated downward to around $3,033/mt, briefly touching a low of $3,016/mt, and finally closed down at $3,066/mt, a decrease of $28.5/mt or 0.94%. Trading volume decreased to 10,345 lots, and open interest decreased by 2,173 lots to 252,000 lots. Overnight, LME zinc recorded a bearish candlestick, with LME inventory increasing by 100 mt to 247,175 mt, an increase of 0.04%. With LME inventory continuously rising and overseas soft squeezes coming to an end, LME zinc shifted downward. However, tight supply at the mine end persisted. Attention was on the US election situation, and it is expected that LME zinc would fluctuate at high levels today.

Overnight, the most-traded SHFE zinc 2412 contract opened at 24,925 yuan/mt. In early trading, SHFE zinc briefly touched a high of 24,940 yuan/mt, then shifted downward to fluctuate around the daily moving average, briefly touching a low of 24,645 yuan/mt, and finally closed down at 24,790.5 yuan/mt, a decrease of 330 yuan/mt or 1.31%. Trading volume decreased to 110,000 lots, and open interest decreased by 1,197 lots to 109,000 lots. Overnight, SHFE zinc recorded a bearish candlestick. Fundamentally, domestic social inventory continued to increase while consumption gradually weakened, putting pressure on SHFE zinc. However, tight supply at the mine end still provided support for SHFE zinc. It is expected that SHFE zinc will mainly fluctuate at high levels today.

Tin

Yesterday, the spot market experienced sluggish transactions, with little change in quotations from trading companies. The premiums and discounts for various domestic tin ingot brands remained stable. Small brand tin ingot was quoted at a discount of 100-0 yuan/mt against the SHFE 2412 contract, delivery brand was quoted at a premium of 0-300 yuan/mt over the SHFE 2412 contract, Yunnan tin brand was quoted at a premium of 500-700 yuan/mt over the SHFE 2412 contract, and imported tin brand was quoted at a discount of 700 yuan/mt against the SHFE 2412 contract. Yesterday, tin prices remained rangebound at high levels, and the spot market saw sluggish transactions. Downstream companies, faced with high prices, opted to wait and see, with only a very few companies restocking as needed in small quantities. Most trading companies only maintained sporadic transactions. Overall, market sentiment was poor. In summary, tin prices showed a strong upward trend, which somewhat suppressed spot market transactions.

Nickel

On November 4, Jinchuan nickel was quoted at a premium of 1,600-1,800 yuan/mt, with an average of 1,700 yuan/mt, remaining flat compared to the previous trading day. Norilsk nickel was quoted at a discount of 400-100 yuan/mt, with an average of 250 yuan/mt, also remaining flat compared to the previous trading day. On the morning of November 4, the futures market fluctuated, and there was no significant change in spot premiums compared to the previous working day. Nickel briquette prices were 123,900-124,200 yuan/mt (out of stock), up 1,150 yuan/mt from the previous trading day. The price spread between nickel briquette and nickel sulphate was about 268 yuan/mt (nickel sulphate prices were 268 yuan/mt higher than nickel briquette prices).