SMM Morning Comment For SHFE Base Metals On December 12

SHANGHAI, December 12 (SMM) –

Copper

LME copper opened at $9,180/mt overnight, initially dipped to $9,163.5/mt, and then fluctuated upward to a high of $9,234/mt during the session, before retreating to close at $9,177/mt, down 0.61%. Trading volume reached 20,000 lots, and open interest was 269,000 lots. The most-traded SHFE copper 2501 contract opened at 75,250 yuan/mt, fluctuated upward to a high of 75,550 yuan/mt initially, then fluctuated downward during the session, dipped to 75,240 yuan/mt near the close, and finally rebounded slightly to close at 75,410 yuan/mt, down 0.11%. Trading volume reached 21,000 lots, and open interest was 149,000 lots. Macro side, the US November unadjusted CPI YoY growth rate further rebounded, rising for the second consecutive month to 2.7%. The US November core consumer price index increased by 3.3% YoY and 0.3% MoM, all meeting expectations. Following the data release, the US dollar rose, with the US dollar index stabilizing above the 106 mark, putting pressure on copper prices. Fundamentally, supply side, with the last trading day of the SHFE copper 2412 contract approaching, suppliers are clearing inventory, leading to an increase in copper cathode spot supply. However, on the demand side, despite the rise in copper prices, downstream purchasing sentiment remains lukewarm, with opportunistic low-price buying prevailing, resulting in overall average transaction performance. Price-wise, the market has strengthened its expectation that the US Fed will cut interest rates by 25 basis points in December, which is almost "a sure thing." It is expected that today's copper prices will have limited downside space but will also be suppressed by the US dollar.

Aluminum

Overnight, the most-traded SHFE aluminum 2501 contract opened at 20,300 yuan/mt, reached a high of 20,410 yuan/mt and a low of 20,345 yuan/mt, and closed at 20,395 yuan/mt, up 10 yuan/mt or 0.05% from the previous day. On Wednesday, LME aluminum opened at $2,616/mt, reached a high of $2,625/mt and a low of $2,576/mt, and closed at $2,606/mt, down $9/mt or 0.34%.

Summary: On the macro front, expectations for US Fed interest rate cuts have strengthened again, while the hot war situation, which was expected to ease, has once again fluctuated. On the fundamentals side, high aluminum production costs have raised concerns about production cuts. On the demand side, it is currently the off-season for consumption, and the operating rate of aluminum processing enterprises is declining steadily. However, social inventory of aluminum ingot remains at a relatively low level below 600,000 mt. In the short term, aluminum prices are expected to fluctuate. Changes in the macro situation and the trend of aluminum production costs remain the biggest variables at present.

Lead

Overnight, LME lead opened at $2,068.5/mt, fluctuating around the daily moving average during the Asian session. Entering the European session, it slightly consolidated before falling to a low of $2,032/mt, finally closing at $2,032/mt, down $33/mt, a decrease of 1.6%.

Overnight, the most-traded SHFE lead 2501 contract opened at 17,690 yuan/mt. After initially rising to a high of 17,705 yuan/mt, bulls continued to reduce positions and exit, causing SHFE lead to fluctuate downward to a low of 17,550 yuan/mt, ultimately closing at 17,555 yuan/mt, down 100 yuan/mt, a decrease of 0.57%.

Macro side, the US November CPI rose for two consecutive months, in line with market expectations, enhancing the anticipation of a Fed interest rate cut next week. The US dollar index hovers at highs.

Fundamentals side, the effect of smoggy weather on secondary refined lead production and transportation slightly eased. With increased circulating spot supply, spot cargoes were still quoted at small discounts, and transactions were relatively mediocre. Primary lead smelter inventories remain low, with smelters in Hunan, Guangdong, and Henan maintaining relatively low inventory levels, with no expectation of lowering premiums. Overnight, LME lead decline dragged down SHFE lead, with bulls cautiously avoiding risks, putting short-term pressure on SHFE lead at high levels.

Zinc

US CPI rose for two consecutive months; EU ambassadors agreed on Wednesday to impose the 15th round of sanctions on Russia; OPEC lowered its oil demand growth forecast for the fifth consecutive month; US officials stated that Russia might launch another experimental "Hazel" missile towards Ukraine in the coming days; it is reported that Bank of Japan officials are open to a rate hike in December; Bank of Canada cut interest rates by 50 basis points for the second consecutive month; Vice President Han Zheng met with the French delegation of the sixth China-France High-Level Dialogue; Ma Ying-jeou will lead a delegation to visit the mainland from December 18 to 26.

Overnight, LME zinc opened at $3,147/mt, briefly rose to $3,170/mt after the opening, then fell all the way down to around $3,120/mt, and subsequently hovered below the daily moving average, hitting a low of $3,109/mt, and finally closed down at $3,119/mt, down $30/mt, a decline of 0.95%. Trading volume increased to 6,945 lots, and open interest decreased by 297 lots to 240,000 lots. Overnight, LME zinc recorded a bearish candlestick, with the 5-day moving average providing support below. LME zinc inventory decreased by 2,100 mt to 274,950 mt, a decline of 0.76%. The US dollar index rose, putting pressure on zinc prices, but subsequently, the US November CPI rose for two consecutive months to 2.7%, in line with market expectations. The market's expectation for a 25 basis point interest rate cut by the US Fed in December strengthened, and overall, LME zinc remains at high levels.

Overnight, the most-traded SHFE zinc 2501 contract opened at 25,790 yuan/mt, hovered around the daily moving average after the opening, fell below the daily moving average to a low of 25,775 yuan/mt during the session, briefly rose to a high of 25,900 yuan/mt near the close, and finally closed down at 25,855 yuan/mt, down 15 yuan/mt, a decline of 0.06%. Trading volume decreased to 53,275 lots, and open interest decreased by 1,770 lots to 138,000 lots. Overnight, SHFE zinc recorded a bullish candlestick, with the 10-day moving average providing support below. As the weather turns colder, downstream demand may decline, coupled with a slight improvement in supply, the fundamentals support for zinc prices weakens, but the market is still digesting previous optimistic sentiment, and overall, SHFE zinc hovers at highs.

Tin

During yesterday's night session, SHFE tin prices showed a steady upward trend, with the overall movement indicating strong bullish momentum. However, in the spot market, trading atmosphere remained sluggish, with overall trading volume staying at a low level and market activity lacking vigor. Regarding smelters' quotations, most factories maintained stable prices around 250,000 yuan/mt, but actual shipments were limited. Downstream enterprises and traders showed weak purchase willingness, with relatively small purchase volumes. Although trading enterprises actively quoted prices to downstream companies seeking transaction opportunities, market response was not enthusiastic. Most downstream enterprises chose to maintain a wait-and-see attitude, with only a few making purchases due to rigid demand. In terms of overall market trading conditions, transaction activity remained sluggish. Most trading enterprises maintained scattered transaction levels, with only a few able to achieve trading volumes of one truckload. Currently, tin prices have successfully broken through the important threshold of 250,000 yuan/mt, and most market participants hold optimistic expectations for the price outlook, believing that prices will continue to rise.

Nickel

Spot premiums/discounts: The mainstream premium for Jinchuan #1 nickel was 3,500-3,700 yuan/mt, with an average of 3,600 yuan/mt, up 500 yuan compared to the previous trading day. The spot premium for Norilsk nickel was -250-0 yuan/mt, with an average of -125 yuan/mt, unchanged from the previous trading day.

Futures market: On December 11, following a decline in SHFE nickel prices during the night session, nickel prices maintained a sideways movement in the morning with strong support. The midday closing price fell 1,600 yuan/mt to 125,500 yuan/mt, a decrease of 1.26%.

Spot market: Following a decline in SHFE nickel prices in the evening, nickel prices maintained a fluctuating trend throughout the day with strong support. Currently, numerous macro benefits are in a tug-of-war with persistently bearish fundamentals. After yesterday's decline in nickel prices, spot premiums/discounts immediately rebounded. Looking ahead, nickel prices face significant upward resistance due to poor fundamentals.

Nickel sulphate price spread: Nickel briquette prices were 124,600-125,000 yuan/mt, down 1,900 yuan/mt from the previous trading day. The price spread between refined nickel and nickel sulphate was 4,800 yuan/mt.