SMM Morning Comment For SHFE Base Metals On November 7

SHANGHAI, November 7 (SMM) –

Copper

LME copper opened overnight at $9,529/mt, declined steadily from the beginning to the middle of the session, and touched a low of $9,302/mt before closing at $9,321/mt, down 4.23%. Trading volume reached 45,000 lots, and open interest was 278,000 lots. The most-traded SHFE copper 2412 contract opened overnight at 76,090 yuan/mt, fluctuated downward initially, touched a low of 75,520 yuan/mt during the session, and then slightly fluctuated upward towards the end, closing at 75,770 yuan/mt, down 2.19%. Trading volume reached 69,000 lots, and open interest was 157,000 lots. Macro side, Trump announced his victory, and the US dollar index fluctuated upward, putting pressure on copper prices. Additionally, concerns arose that major electrification initiatives in the US might regress, further suppressing copper demand and pressuring copper prices. It is also noteworthy that the "Fed's mouthpiece" indicated that if the Republicans control both houses of Congress, the US Fed might revise its basic assumptions in December. Fundamentally, a large influx of imported copper led to spot premiums turning into discounts within the week, and the contango structure expanded again, suggesting that suppliers' willingness to sell might decrease. Overall, the strong performance of the US dollar index pressured copper prices, which returned to the 75,000 yuan/mt range. Consumption might improve to some extent, and the market is awaiting the US Fed's interest rate meeting this week. Copper prices are expected to maintain a fluctuating trend before the interest rate cut results are announced.

Aluminum

Futures market: The most-traded SHFE aluminum 2412 contract opened at 20,875 yuan/mt overnight, reaching a high of 21,005 yuan/mt and a low of 20,825 yuan/mt, and closed at 20,980 yuan/mt, down 220 yuan/mt from the previous close, a decrease of 1.04%. Trading volume was 80,000 lots, open interest was 198,000 lots, with a daily reduction of 5,774 lots. On Wednesday, LME aluminum opened at $2,639/mt, reached a high of $2,653/mt, a low of $2,568.5/mt, and closed at $2,615/mt, down $44/mt, a decrease of 1.65%.

Summary: On the macro front, trade on Trump victory returns, with the US dollar index fluctuating upward. Short-term macro sentiment is highly volatile, putting pressure on the metal market, and aluminum futures fell overnight. In the medium and long term, global monetary policy and inflation trends still need attention. On the fundamentals side, the recent rise in aluminum costs is significant, with some companies planning to shut down for maintenance, but the impact on production is limited, and the supply and demand relationship remains relatively stable. Social inventory has been affected by transportation issues, continuously destocking to below the 600,000 mt mark. Alumina spot supply is tight, and with some companies reducing or halting production, alumina prices are fluctuating upward, providing strong support to aluminum prices from the cost side. Overall, domestic aluminum remains in a state of low inventory and rising costs, and short-term aluminum prices may fluctuate upward.

Lead

Overnight, LME lead opened at $2,022/mt, fluctuated downward to a low of $2,005.5/mt during the Asian session, fluctuated upward after entering the European session, peaked at $2,049.5/mt by the end of the session, and finally closed at $2,046/mt, up 0.86%.

Overnight, the most-traded SHFE lead 2412 contract opened at 16,715 yuan/mt, briefly touched a low of 16,655 yuan/mt at the beginning of the session, then fluctuated upward due to shorts reducing positions, peaked at 16,795 yuan/mt, and finally closed at 16,755 yuan/mt, up 0.48%.

Macro side, the US dollar index surged to a four-month high due to expectations that Trump's immigration, tax, and trade policies after his election victory would stimulate higher growth and inflation in the US.

Fundamentals, the market supply of lead ingots was moderate, with a tight supply of secondary lead and firm quotations from suppliers. Recently, the transaction of primary lead was good, and downstream enterprises' inquiries and purchasing willingness improved compared to the previous period. Additionally, as pollution weather warnings were gradually lifted, many regional refineries resumed normal production, potentially increasing the demand for battery scrap, and raw material prices also supported lead prices. Overall, lead prices may still fluctuate rangebound in the near term.

Zinc

Overnight, LME zinc opened at $3,085.5/mt, an intraday high. Later, LME zinc fluctuated widely along the daily moving average. After Trump's victory, due to concerns about demand, bulls reduced their positions, and LME zinc fluctuated downward, hitting a low of $2,960/mt at the end of the session, finally closing down at $2,966/mt, a drop of $144.5/mt, or 4.65%. Trading volume increased to 14,908 lots, and open interest decreased by 3,516 lots to 247,000 lots. Overnight, LME zinc recorded a bearish candlestick, with LME inventory decreasing by 350 mt to 245,325 mt, a decline of 0.14%. Due to expectations that Trump's post-election immigration, tax, and trade policies will stimulate higher growth and inflation in the US, the US dollar index surged to a four-month high, causing a broad decline in base metals, with LME zinc falling sharply. LME zinc is expected to fluctuate today.

Overnight, the most-traded SHFE zinc 2412 contract opened at 24,665 yuan/mt. At the beginning of the session, bulls reduced their positions, causing SHFE zinc to briefly dip to 24,605 yuan/mt. Later, SHFE zinc's focus shifted upward to around 24,725 yuan/mt. Subsequently, bears reduced their positions, and SHFE zinc's focus moved upward, reaching a high of 24,880 yuan/mt at the end of the session. SHFE zinc finally closed down at 24,800 yuan/mt, a drop of 155 yuan/mt, or 0.62%. Trading volume decreased to 86,425 lots, and open interest decreased by 222 lots to 102,000 lots. Overnight, SHFE zinc recorded a bullish candlestick. Macro sentiment resurfaced with Trump's victory, and domestic concerns about subsequent US policies suppressing exports and demand led to a broad decline in base metals, with SHFE zinc's focus shifting downward. SHFE zinc is expected to fluctuate mainly today.

Tin

Yesterday, the spot tin market saw relatively quiet trading, with trade companies' quotations remaining stable and showing no significant fluctuations. The price range for tin ingots of various domestic brands was relatively fixed. Small brand tin ingots and imported tin ingots had a slight discount to the SMM 1# tin ingot price, while delivery brand and Yunnan Tin brand tin ingots had a slight premium to the SMM 1# tin ingot price. Overall, tin prices remained at a relatively high level in yesterday's market. During the night session, SHFE tin prices opened low and continued to fall, but this did not stimulate trading activity in the spot market. Most downstream companies adopted a wait-and-see attitude, with only a few companies making small purchases yesterday. Most companies had scattered trading volumes, with only a few reaching volumes of 20-30 mt. Overall, the market trading atmosphere was not strong. In summary, although tin prices dropped back slightly from their high levels, the spot market's response was relatively indifferent, and trading activity did not effectively pick up.

Nickel

On November 6, 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 400-0 yuan/mt, with an average of 200 yuan/mt, also unchanged from the previous trading day. On the morning of November 6, the futures market fluctuated, and there was no significant change in the spot market premium compared to the previous working day. Nickel briquette prices were 125,500-125,750 yuan/mt (out of stock), up 1,825 yuan/mt from the previous trading day. The price spread between nickel sulphate and nickel briquette was about 1,466 yuan/mt (nickel sulphate prices were 1,466 yuan/mt lower than nickel briquette prices).