SMM Morning Comment For SHFE Base Metals On December 6

SHANGHAI, December 6 (SMM) –

Copper

LME copper opened at $9,102/mt overnight. After an initial decline, it maintained a wide fluctuating trend throughout the session, with the center shifting downward. It peaked at $9,110/mt at the beginning of the session and hit a low of $9,060/mt at the end, finally closing at $9,090/mt, down 0.08%. Trading volume reached 12,000 lots, and open interest was 268,000 lots. The most-traded SHFE copper 2501 contract opened at 74,630 yuan/mt overnight, peaked at 74,700 yuan/mt at the beginning of the session, then declined to a low of 74,280 yuan/mt, and maintained a wide fluctuating trend thereafter, finally closing at 74,400 yuan/mt, down 0.13%. Trading volume reached 20,000 lots, and open interest was 155,000 lots. Macro side, initial jobless claims in the US last week were higher than expected, leading to a decline in the US dollar index. However, due to the uncertainty of domestic consumption stimulus policy, market sentiment declined, causing copper prices to fall slightly. On the fundamentals side, downstream demand was generally weaker than in November, with enterprises maintaining just-in-time procurement. However, with suppliers actively shipping, the continuously imported supplies were rapidly consumed. As of Thursday, December 5, SMM national copper inventories in mainstream regions nationwide decreased by 12,900 mt compared to Monday, reaching 130,300 mt, and decreased by 7,200 mt compared to last Thursday, marking the seventh consecutive week of destocking, although the destocking speed has slowed. Attention will be on whether destocking can continue next week. Overall, the market lacks clear guidance, and copper prices are expected to maintain a fluctuating trend today.

Aluminum

Overnight, the most-traded SHFE aluminum 2501 contract opened at 20,550 yuan/mt, reached a high of 20,570 yuan/mt, a low of 20,460 yuan/mt, and closed at 20,475 yuan/mt, down 30 yuan/mt from the previous day, a decrease of 0.15%. On Thursday, LME aluminum opened at $2,638/mt, hit a high of $2,649/mt, a low of $2,626/mt, and closed at $2,638/mt, down $0.5/mt, a decrease of 0.02%.

Summary: On the macro front, political disputes in France and South Korea have intensified, and the situations in the Middle East and Russia-Ukraine remain uncertain, keeping market risk aversion sentiment alive. US Fed officials are open to an interest rate cut in December, while the European Central Bank and the Bank of England have both indicated continued interest rate cuts, leading to a slight rebound in non-ferrous metals. Domestically, positive signals have been released, with policy support emerging again, but potential risks from tariff and trade wars still need attention. On the fundamentals side, although aluminum production in November saw YoY growth, high aluminum costs have raised concerns about production cuts at high-cost enterprises, with domestic aluminum operating capacity showing mixed changes. In terms of inventory, despite a recent easing in the shipment pace of goods from Xinjiang, leading to fluctuating domestic aluminum ingot inventory, it is expected that the backlog situation in Xinjiang will continue to ease, necessitating caution against the pressure and risks from concentrated arrivals. Meanwhile, although the year-end inventory buildup inflection point has been delayed, the sustainability of off-season aluminum ingot outflows from warehouses is limited. Low inventory continues to provide short-term support for aluminum prices, but excessive optimism is unwarranted. Overall, the cancellation of export tax rebates for aluminum semis in December negatively impacts mid-term aluminum demand, but short-term market sentiment has somewhat eased, and the cost side continues to provide strong support. Aluminum prices are expected to mainly fluctuate in the near term.

Lead

Overnight, LME lead opened at $2,087.5/mt. Overseas lead ingot inventory slightly decreased, while the US dollar further weakened, leading to a general strengthening of base metals. During this period, LME lead continued to fluctuate upward, reaching a peak of $2,100/mt, setting a new one-and-a-half-month high. By the end of the session, it closed at $2,098/mt, up 0.55%.

Overnight, the most-traded SHFE lead 2501 contract opened at 17,610 yuan/mt. Driven by the rise in LME lead, bulls increased their positions, pushing the center of SHFE lead upward to above 17,700 yuan/mt. By the end of the session, it closed at 17,710 yuan/mt, up 0.57%. Its open interest reached 56,040 lots, an increase of 806 lots from the previous trading day.

Macro side, Chinese Finance Minister Lan Fo'an stressed accelerating the implementation of a package of hidden debt resolution policies: expedite bond issuance and usage to maximize policy and fund effectiveness as soon as possible; resolutely curb new hidden debts and improve local government debt management; promote the reform and transformation of financing platforms, and firmly prevent illegal provision of new financing services to local governments. France has entered a caretaker government period, with Macron accepting Prime Minister Barnier's resignation.

Fundamental side, domestic lead ingot social inventory is decreasing, and lead prices continue to fluctuate upward. Meanwhile, it is important to note that secondary lead profits are improving, increasing the production enthusiasm of smelting enterprises. Attention should be paid to the resumption of production and the release of new capacity in secondary lead enterprises. The expectation of increased production in secondary lead enterprises leads to a rise in demand for scrap, thereby raising battery scrap prices, which could indirectly reduce the profit margin of secondary lead. Additionally, next week is the week before the delivery of the SHFE lead 2412 contract, and we need to monitor the risk of explicit inventory accumulation due to the transfer of lead ingots to warehouses for delivery.

Zinc

Overnight, OPEC+ decided to extend its production cut policy; US initial jobless claims last week unexpectedly exceeded expectations; French President Emmanuel Macron announced that a new prime minister will be appointed in the coming days; South Korea's Democratic Party plans to vote to impeach Yoon Suk-yeol at 6 PM Beijing time on Saturday; the Syrian government forces claimed to have lost control of the strategic central city of Hama; the World Gold Council reported that global central banks net purchased 60 mt of gold in November, with India leading by adding 27 mt; President Xi Jinping emphasized the need to advance the development of the military's cyber information system; the General Office of the CPC Central Committee and the General Office of the State Council issued opinions on promoting the construction of new urban infrastructure to build resilient cities; Vice Premier He Lifeng stated that China is steadily expanding institutional opening in the financial sector and welcomes foreign enterprises to deepen mutually beneficial cooperation.

Overnight, LME zinc opened at $3,084/mt, quickly declined to a low of $3,070.5/mt at the beginning of the session, and then rose to a high of $3,127/mt during European trading hours as bulls increased their positions. It later fluctuated around $3,110/mt and finally closed up at $3,108/mt, an increase of $23/mt or 0.75%. Trading volume decreased to 8,191 lots, and open interest increased by 856 lots to 244,000 lots. Overnight, LME zinc recorded a bullish candlestick, with LME inventory decreasing by 300 mt to 277,800 mt, a drop of 0.11%. LME canceled warehouse warrants reached 106,600 mt. US initial jobless claims last week unexpectedly exceeded expectations, the US dollar weakened, and the center of LME zinc prices shifted upward. It is expected to fluctuate mainly today.

Overnight, the most-traded SHFE zinc 2501 contract opened at 25,600 yuan/mt. At the beginning of the session, SHFE zinc mainly fluctuated along the daily moving average, dipping to a low of 25,530 yuan/mt. Later, as bulls increased their positions towards the end of the session, SHFE zinc fluctuated upward to a high of 25,700 yuan/mt. However, lacking upward momentum, it fell back to near the daily moving average and finally closed up at 25,625 yuan/mt, an increase of 75 yuan/mt or 0.25%. Trading volume decreased to 85,496 lots, and open interest increased by 1,823 lots to 133,000 lots. Overnight, SHFE zinc recorded a small bullish candlestick. Social inventory continued to destock, while consumption remained resilient, and open interest remained at a high level, providing support for SHFE zinc. It is expected to fluctuate mainly today.

Tin

Yesterday, the tin market experienced rangebound price fluctuations. During this period, the overall trading volume in the spot market was relatively low. On the smelter side, their stance to stand firm on quotes remained unwavering. Trading enterprises showed a relatively positive attitude in their quotations; however, the purchase willingness of downstream enterprises was not high. There were only a few inquiries and some just-in-time procurement. Most downstream and end-user enterprises had already stocked up significantly when prices were at a low level earlier. As prices gradually increased, most downstream enterprises chose to wait and see, anticipating new market trends and preferring to maintain a cautious procurement strategy. Overall, market activity remained sluggish. Specifically, most trading enterprises' trading volumes were only around 10 mt, with a few enterprises achieving a trading volume of about one truckload. Considering that prices continued to fluctuate rangebound during the night session, it is expected that the spot market will continue to maintain a sluggish trading atmosphere.

Nickel

Spot Premiums/Discounts: The mainstream spot premium for Jinchuan #1 nickel was 2,800-3,000 yuan/mt, with an average of 2,900 yuan/mt, unchanged from the previous trading day. The spot premium for Norilsk nickel was -300-0 yuan/mt, with an average of -150 yuan/mt, also unchanged from the previous trading day.

Futures Market: On December 5, nickel prices fell sharply in the morning, with the midday closing price dropping by 1,710 yuan/mt to 125,700 yuan/mt, a decline of 1.34%. The SMM1# refined nickel price fell by 1,450 yuan/mt to 127,575 yuan/mt.

Spot Market: Following the macro-driven surge in SHFE nickel prices, nickel prices saw a significant correction in the morning, quickly falling back to the levels of previous days. Changes in spot premiums for various brands were relatively small. With the continuous increase in domestic electrodeposited nickel, the ongoing accumulation of SHFE and LME inventories, and lower Indonesian ore prices amid the easing of premiums in December, multiple bearish factors intertwined, and the macro benefits were quickly digested in the futures market, leading to a nickel price correction. Domestic spot transactions remained average, with downstream sentiment continuing to be cautious.

Price Spread with Nickel Sulphate: Nickel briquette prices were 125,000-126,750 yuan/mt (in short supply), down 1,450 yuan/mt from the previous trading day. The price spread between nickel sulphate and nickel briquette was approximately 6,332 yuan/mt today.