SMM Morning Comment For SHFE Base Metals (Nov 11)

SHANGHAI, Nov 11 (SMM) –

Copper

Copper Prices Under Pressure Amid Strong US Dollar [SMM Copper Morning Comment]

Last Friday evening, LME copper opened at $9,496.5/mt and initially dipped slightly before rising to a high of $9,515.5/mt. It then declined all the way, touching a low of $9,410.5/mt near the close, and finally rebounded slightly to close at $9,433/mt, down 2.54%. Trading volume reached 22,000 lots, and open interest was 276,000 lots. Last Friday evening, the most-traded SHFE copper 2412 contract opened at 76,480 yuan/mt, initially touched a high of 76,810 yuan/mt, then fluctuated downward, touching a low of 76,380 yuan/mt near the close, and finally closed at 76,420 yuan/mt, down 1.1%. Trading volume reached 34,000 lots, and open interest was 148,000 lots. Macro side, last Friday, the "Trump trade" momentum persisted, the US dollar index resumed its upward trend, and a survey released on Friday showed that US consumer confidence in early November rose to its highest level in seven months, which was bearish for copper prices. Additionally, traders' concerns about long-term supply disruptions caused by hurricanes in the US Gulf of Mexico eased, and the potential increase in US oil supply under Trump's administration led to a decline in international crude oil prices, dragging copper prices down. Fundamentally, last Friday, copper prices rebounded to previous highs, market demand weakened, and downstream buyers mainly focused on long-term contracts, resulting in poor spot market transactions. On the price side, last Friday, the National People's Congress Standing Committee approved an increase of 6 trillion yuan in local government debt limits to replace existing implicit debt, and the Ministry of Finance issued a package of debt resolution policies, providing some support for copper prices at the bottom. However, the strong US dollar background is bearish for copper prices, and it is expected that copper prices will remain under pressure today.

Aluminum

US Consumer Confidence Index Rises, Aluminum Prices Adjust at Highs [SMM Aluminum Morning Meeting Summary Nov 11]

Last Friday night, the most-traded SHFE aluminum 2412 contract opened at 21,490 yuan/mt, reaching a high of 21,630 yuan/mt and a low of 21,440 yuan/mt, and closed at 21,530 yuan/mt, down 140 yuan/mt from the previous close, a decrease of 0.65%. The trading volume was 81,900 lots, and the open interest was 215,000 lots, with a daily reduction of 4,900 lots. On Friday, LME aluminum opened at $2,694.5/mt, hit a high of $2,711.5/mt, a low of $2,616/mt, and closed at $2,627/mt, down $67.5/mt, a decrease of 2.51%.

Summary: On the macro front, the US Fed's interest rate cut in November was as expected, but the statement on achieving inflation targets was removed, suggesting a possible pause in interest rate cuts in December. The US dollar index fluctuated at highs, putting pressure on non-ferrous metals. On the fundamentals side, the recent rise in aluminum costs was significant, with some companies planning to halt production for maintenance, but the impact on production was limited, and the supply and demand relationship remained relatively stable. Social inventory was affected by transportation issues, continuously destocking to below the 600,000 mt mark. Spot alumina supply was tight, and some companies' production cuts and halts caused disruptions, leading to 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 are expected to fluctuate upward.

Lead

Macro Impact Fades, Lead Market Trading Logic Returns to Fundamentals [SMM Lead Morning Comment]

Last Friday, LME lead opened at $2,031.5/mt. After the release of favourable macro front, most base metals returned to fundamentals, with non-ferrous metals generally jumping initially and then pulling back. Especially during the European session, the US dollar index strengthened, and LME lead once fell to $2,022/mt, finally closing at $2,023.5/mt, down 0.66%.

Last Friday, the most-traded SHFE lead 2412 contract opened at 16,855 yuan/mt. With the increase in lead ingot inventory, SHFE lead shifted from daytime strength to fluctuating downward, with the overall operating focus moving downward, finally closing at 16,805 yuan/mt, down 0.47%. Its open interest was 43,633 lots, down 813 lots from the previous trading day.

Macro side, the Standing Committee of the National People's Congress approved an increase of 6 trillion yuan in local government debt limit to replace existing implicit debt. Lan Foan stated that the debt resolution approach has fundamentally changed, directly increasing local debt resolution resources by 10 trillion yuan, with the new 6 trillion yuan local debt limit arranged over three years. China's CPI in October rose 0.3% YoY, down MoM, while PPI YoY decline expanded to 2.9%. According to media supervised by the Ministry of Housing and Urban-Rural Development, the real estate market has initially stopped declining, but the "dammed lake" phenomenon still needs to be eliminated. After the US Fed's interest rate cut, the first wave of high-ranking officials' speeches indicated that a stronger economy means fewer interest rate cuts.

Fundamentals side, recently, social inventory of lead ingots increased, while smelter inventory decreased, reducing market circulating supply. Both primary lead and secondary lead tended to trade at a premium (to SMM 1# lead average price). Moving forward, we need to pay attention to the risk of significant inventory increase due to lead ingot transfer and warehouse delivery, and also monitor the resumption of secondary lead enterprises after the lifting of environmental protection factors, being cautious of the risk of lead prices jumping initially and then pulling back.

Zinc

US Dollar Index Rises Again, SHFE Zinc Focus Declines [SMM Zinc Morning Comment Nov 11]

Trump sweeps seven swing states, plans to exert maximum pressure on Iran; Biden administration purchases the last 2.4 million barrels of strategic petroleum reserves; reports suggest Israel is weighing the possibility of a timed ceasefire agreement with Lebanon; the value of Russia's gold reserves surpasses $200 billion for the first time in history; the Standing Committee of the National People's Congress reviews and approves the largest debt relief measures in recent years; 24 departments in China jointly issue a document to further promote elderly care service consumption; China's monetary policy implementation report: intensifying monetary policy regulation; the CSRC holds two consecutive symposiums.

Last Friday, LME zinc opened at $3,063/mt, initially touched $3,071/mt, then fluctuated downward, hitting a low of $2,970/mt near the close, and finally closed down at $2,984/mt, a drop of $87/mt or 2.83%. Trading volume decreased to 12,422 lots, and open interest increased by 113 lots to 243,000 lots. Last Friday, LME zinc recorded a bearish candlestick, with the 10-day moving average forming resistance above. LME zinc inventory remained flat at 245,225 mt. Last Friday, no unexpected supportive policies were released at the domestic meeting, macro sentiment deteriorated, market concerns about demand persisted, and the US dollar index climbed again, causing LME zinc to decline continuously during the session.

Last Friday, the most-traded SHFE zinc 2412 contract opened at 24,820 yuan/mt, initially dipped to 24,810 yuan/mt, then fluctuated upward to a high of 25,055 yuan/mt, before falling below the daily moving average and fluctuating rangebound, finally closing down at 24,855 yuan/mt, a drop of 170 yuan/mt or 0.68%. Trading volume decreased to 73,281 lots, and open interest decreased by 2,060 lots to 99,582 lots. Last Friday, SHFE zinc recorded a long upper shadow bullish candlestick, with the middle Bollinger Band forming resistance. SMM expects November zinc ingot production to decrease MoM to below 500,000 mt. The off-season for downstream also arrives, and the weak supply and demand pattern in the fundamentals remains unchanged. Coupled with the drag from deteriorating macro sentiment, the focus of SHFE zinc also declines significantly.

Tin

Expectations for "Trump trade" will make it difficult for SHFE tin prices to form a unilateral trend (SMM tin morning comment Nov 11)

Last week, the US election results were announced, confirming Trump's election as the President of the United States. Previously, as Trump led in the polls, the market had anticipated the "Trump trade," which involves potential policy changes affecting the chip and new energy industries, thereby impacting the long-term demand for tin. This expectation has influenced the market trend of tin prices to some extent. Before the US election, SHFE tin prices had already been affected by various factors, including pessimistic macro expectations, changes in US manufacturing PMI and labour market data, as well as the fundamental situation of the tin market itself. These factors collectively led to a significant decline in tin prices over a period of time. During the election, market uncertainty increased, and most companies adopted a wait-and-see attitude, awaiting the election results. As a result, spot market transactions were relatively sluggish, and tin prices showed a fluctuating trend. After Trump's election, the market began to focus on the overall impact of the "Trump trade" on the commodity market. Due to the potential impact of Trump's policy orientation on the long-term demand for tin, market expectations changed, leading to price fluctuations. However, the specific impact still needs further observation of the actual policy direction after the Trump administration takes office. Considering the domestic supply and demand situation, we expect SHFE tin prices to continue to maintain a fluctuating trend. On one hand, with the expectation of marginal improvement in domestic demand, the support for tin prices has strengthened; on the other hand, due to market uncertainty about future inflation trends and global economic recovery, both bulls and bears are cautious, making it difficult for prices to form a unilateral trend.

Nickel

Last week, refined nickel prices fluctuated upward, ranging from 124,000 to 130,000 yuan/mt. Fundamentals, there were no significant structural changes compared to the previous week. From the perspective of the nickel industry chain, current demand shows no significant improvement. The procurement activity for NPI by stainless steel and nickel sulphate by ternary cathode precursors remains low. During the week, nickel sulphate prices remained stable with a weak trend, while NPI prices saw a slight correction. On the fundamentals of refined nickel, demand from downstream alloy, casting, and electroplating sectors was weak, and the shipment of nickel plates was low. Additionally, with the price increase during the week and stable premiums/discounts, the stocking costs for downstream manufacturers have risen, resulting in overall low stocking enthusiasm. Currently, the speculation in the nickel industry chain is still focused on the nickel ore end. With the future policies remaining unclear, the market continues to trade on the tight supply of nickel ore. Therefore, SMM expects that nickel prices will still fluctuate at a relatively high level this week, but with limited upward space due to weak fundamentals. The expected range is 128,000 to 133,000 yuan/mt.