SMM Morning Comment For SHFE Base Metals On December 3

SHANGHAI, December 3 (SMM) –

Copper

LME copper opened at $8,996/mt overnight, initially rising to a high of $9,025/mt. It then fluctuated widely, hitting a low of $8,955.5/mt during the session, and finally closed at $8,996.5/mt, down 0.21%. Trading volume reached 17,000 lots, and open interest was 268,000 lots. The most-traded SHFE copper 2501 contract opened at 73,810 yuan/mt overnight, initially hitting a low of 73,800 yuan/mt. It then fluctuated upward before the center shifted downward, reaching a high of 74,170 yuan/mt during the session, and finally closed at 74,060 yuan/mt, up 0.47%. Trading volume reached 29,000 lots, and open interest was 163,000 lots. Macro side, US Fed Governor Waller indicated a preference for an interest rate cut in December but remained open to pausing rate cuts. The US November ISM Manufacturing PMI recorded 48.4, the highest since June 2024. The rise in the US dollar pressured LME copper downward, but signs of recovery in domestic manufacturing led to mixed performance in LME and SHFE copper prices. Fundamentally, with smelter maintenance completed, domestic copper supply is expected to increase this week. Imported copper continued to arrive, and total supply is expected to increase compared to last week. Meanwhile, the operating rate of copper cathode rod producers is expected to decline this week, with consumption likely weakening after a high operating rate for three weeks. As of Monday, December 2, SMM copper inventories in major regions nationwide increased by 5,700 mt compared to last Thursday, reaching 143,200 mt. However, total inventory was 89,200 mt higher compared to 54,000 mt in the same period last year. Overall, copper prices are expected to fluctuate widely today.

Aluminum

Overnight, the most-traded SHFE aluminum 2501 contract opened at 20,380 yuan/mt, reached a high of 20,460 yuan/mt, a low of 20,370 yuan/mt, and closed at 20,435 yuan/mt, up 50 yuan/mt or 0.25% from the previous day. On Monday, LME aluminum opened at $2,594.5/mt, hit a high of $2,612/mt, a low of $2,574.5/mt, and closed at $2,600.5/mt, up $1.5/mt or 0.06%.

Summary: On the macro front, there is a possibility of a ceasefire in the Middle East and the Russia-Ukraine situation. Several US Fed officials are open to an interest rate cut in December, leading to a slight rebound in non-ferrous metals. Domestically, positive signals were released, with the November manufacturing PMI above the 50 mark. On the fundamentals side, high costs of aluminum have raised concerns about production cuts among high-cost enterprises. However, buying sentiment in the downstream market has weakened due to the off-season, leading to a weak spot market. In terms of inventory, although the shipping pace of goods from Xinjiang has recently eased, causing domestic aluminum ingot inventory to fluctuate, it is expected that the backlog in Xinjiang will continue to ease, and caution is needed against the pressure and risks from concentrated arrivals. Meanwhile, although the year-end inventory buildup inflection point has been delayed, the sustainability of unusual increase in aluminum ingot outflows from warehouses in the off-season is limited. Low inventory continues to provide short-term support for aluminum prices, but excessive optimism is not advisable. In the short term, the cancellation of export tax rebates for aluminum semis in December is expected to negatively impact medium and long-term aluminum demand, but short-term market sentiment has eased, and aluminum prices are expected to remain in a state of fluctuation and consolidation in the near term.

Lead

Overnight, LME lead opened at $2,076.5/mt. SHFE lead showed strong performance, driving LME lead to fluctuate upward. During the Asian session, LME lead fluctuated between $2,070-2,080/mt. Entering the European session, the US dollar reversed the trend and rose, causing LME lead to give back some gains, trading below $2,060/mt. The tug-of-war between longs and shorts intensified during the night session, with LME lead rebounding but then falling again in the late session, finally closing at $2,073/mt, down 0.41%.

Overnight, the most-traded SHFE lead 2501 contract opened at 17,635 yuan/mt. Bulls entered the market at the beginning of the session, pushing SHFE lead to a strong upward surge, reaching a three-month high of 17,760 yuan/mt. In the latter part of the trading session, SHFE lead hovered around 17,725 yuan/mt for a long period until the late session, finally closing at 17,695 yuan/mt, up 1.52%. Its open interest reached 63,555 lots, an increase of 3,483 lots from the previous trading day.

Macro side, PBOC announced that a new M1 statistical caliber will be implemented in January next year, including personal current deposits and customer reserves of non-bank payment institutions. Pan Gongsheng stated that the PBOC will continue to adhere to a supportive monetary policy stance and orientation next year. China's Caixin Manufacturing PMI for November rose to 51.5, a five-month high, accelerating expansion. Additionally, US Fed Waller indicated a preference for continuing interest rate cuts in December, but inflation could affect actions, and if inflation unexpectedly rises, a pause in rate cuts might be considered.

Fundamentally, lead prices have shown a fluctuating upward trend recently. Downstream enterprises' wait-and-see sentiment has eased, and they have gradually started inquiring and purchasing, leading to a decline in lead ingot social inventory. Meanwhile, primary and secondary lead smelting enterprises are undergoing both maintenance and recovery. Among them, secondary lead profits have improved, increasing the production enthusiasm of smelting enterprises, but the current spot cargo circulation remains limited. During this period, mainstream primary lead smelters in major production areas quoted cargoes self-picked up from production site at premiums of 50-100 yuan/mt against the SMM 1# lead average price, ex-factory. Secondary refined lead prices varied significantly by region, with spot order quotations ranging from discounts of 100 yuan/mt to premiums of 100 yuan/mt against the SMM 1# lead average price. Future lead prices still need to pay attention to the return of consumption.

Zinc

Overnight, many US Fed officials remained open to an interest rate cut in December; Israel and Lebanon once again accused each other of violating the ceasefire agreement; Trump stated that Hamas would pay a heavy price if Gaza hostages were not released before the inauguration; OPEC might extend the latest production cuts until the end of Q1 2025; the unemployment rate in the Eurozone remained at a historic low; MicroStrategy increased its Bitcoin holdings for the fourth consecutive week, with total holdings reaching $38 billion; President Xi Jinping emphasized the comprehensive promotion of high-quality development of the "Belt and Road" initiative; PBOC Governor Pan Gongsheng stated that the central bank would continue to adhere to supportive monetary policy stance and orientation next year; the PBOC announced that starting from January 2025, a new revised narrow money (M1) statistical caliber would be used, and two new financial instruments would be added.

Overnight, LME zinc opened at $3,099/mt, quickly peaked at $3,110/mt at the opening, then the bulls reduced positions, causing the LME zinc center to shift downward, hitting a low of $3,062/mt during the night session, and finally closed down at $3,081.5/mt, down $27/mt, a decline of 0.81%. Trading volume decreased to 9,323 lots, and open interest decreased by 1,605 lots to 248,000 lots. Overnight, LME zinc recorded a small bearish candlestick, with LME inventory decreasing by 575 mt to 276,275 mt, a decline of 0.21%. On the macro front, the US manufacturing ISM data recorded 48.4, the best data since June, and the US dollar strengthened, putting pressure on LME zinc, which is expected to fluctuate mainly today.

Overnight, the most-traded SHFE zinc 2501 contract opened at 25,530 yuan/mt, quickly hit a low of 25,405 yuan/mt at the beginning of the session, then recorded a "V" shaped rebound peaking at 25,565 yuan/mt, followed by an increase in short positions, causing SHFE zinc to fluctuate downward, and finally closed down at 25,415 yuan/mt, down 40 yuan/mt, a decline of 0.16%. Trading volume decreased to 69,578 lots, and open interest increased by 2 lots to 142,000 lots. Overnight, SHFE zinc recorded a bearish candlestick. In terms of fundamentals, despite imbalance in the raw material end, and social inventory continues destocking, the demand side has weakened as the weather turns colder, causing the SHFE zinc center to shift downward, and it is expected to fluctuate downward mainly today.

Tin

Yesterday, trading in the tin market cooled down, with trading enterprises' quotations remaining stable and showing no significant fluctuations. The price range of tin ingots from various domestic brands remained relatively fixed. Small-brand tin ingots and imported tin ingots were at a slight discount against SMM 1# tin ingot prices, while delivery brand prices and Yunnan Tin brand tin ingots were at a slight premium against SMM 1# tin ingot prices. In yesterday's market, tin prices fluctuated rangebound, opening slightly lower in the night session before rebounding to around 261,500 yuan/mt. Trading activity in the spot market was sluggish, with most downstream enterprises having completed their restocking needs. Among trading enterprises, most had trading volumes around 10 mt, with a few reaching a full truckload. Overall, the market trading atmosphere was relatively quiet, and the availability of spot cargo was somewhat tight.

Nickel

Spot Premiums/Discounts: The mainstream premium for Jinchuan #1 nickel was quoted at 2,800-3,000 yuan/mt, with an average of 2,900 yuan/mt, unchanged from the previous trading day. The premium for Norilsk nickel was -400- 0 yuan/mt, with an average of -200 yuan/mt, up 50 yuan from the previous trading day.

Futures Market: On December 2, SHFE nickel prices fluctuated downward in the morning and then slightly rebounded. The midday closing price fell by 1,480 yuan/mt to 125,690 yuan/mt, a decrease of 1.16%.

Spot Market: Nickel prices fluctuated at low levels during the day. Although futures prices were low, the morning premiums for Jinchuan brand nickel remained largely stable without significant increases. Morning transactions slightly improved, and the discounts/premiums for electrodeposited nickel and Norilsk nickel slightly increased. The premium for Nikkelverk nickel and Sumitomo nickel remained largely stable.

Nickel briquette prices were 124,400-125,000 yuan/mt (out of stock), down 2,425 yuan/mt from the previous trading day.