SMM Morning Comment For SHFE Base Metals (Dec 16)

SHANGHAI, Dec 16 (SMM) –

Copper

Strengthening US Dollar Pressures Copper Prices, Market Consumption Slightly Mediocre [SMM Copper Morning Comment Dec 16]

Last Friday evening, LME copper opened at $9,100/mt, fluctuated at high levels initially, and peaked at $9,113/mt. It then declined throughout the session, hitting a low of $9,036/mt, with the center rebounding slightly by the close, ultimately settling at $9,056.5/mt, down 0.17%. Trading volume reached 15,000 lots, and open interest stood at 270,000 lots. Last Friday evening, the most-traded SHFE copper 2501 contract opened at 74,680 yuan/mt, peaked at 74,870 yuan/mt in early trading, and then declined throughout the session, hitting a low of 74,310 yuan/mt by the close. The center rebounded slightly, ultimately settling at 74,350 yuan/mt, down 0.51%. Trading volume reached 24,000 lots, and open interest stood at 142,000 lots. Macro side, the strengthening US dollar pressured copper prices downward. Domestically, the China Securities Regulatory Commission stated its firm commitment to stabilizing the real estate and stock markets and ensuring the stability of the capital market. Meanwhile, multiple departments, including the Ministry of Housing and Urban-Rural Development and the Ministry of Finance, issued statements forecasting favorable policies for the future. Fundamentally, low-priced imported copper continued to flow into the market, suppressing premiums and discounts. Additionally, copper rod enterprises gradually consumed their orders on hand last week. Approaching year-end, most enterprises are likely to focus on collecting payments and closing accounts, leading to slightly mediocre overall consumption. Today marks the last trading day for the SHFE copper 2412 contract, and consumption is expected to cool further. In summary, with multiple departments voicing support for favorable future policies, copper prices are expected to find some support today.

Aluminum

Domestic Macro Continues to Signal Easing; Weakening Demand at Home and Abroad [SMM Aluminum Morning Meeting Summary Dec 16]

Last Friday night, the most-traded SHFE aluminum 2502 contract opened at 20,395 yuan/mt, reaching a high of 20,465 yuan/mt and a low of 20,325 yuan/mt, before closing at 20,345 yuan/mt, down 5 yuan/mt or 0.02% from the previous close. Last Friday, LME aluminum opened at $2,602/mt, hit a high of $2,618/mt and a low of $2,586/mt, and closed at $2,615/mt, up $11/mt or 0.42%.

Summary: On the macro front, the US dollar fell 0.07% overnight but rose 0.92% on a weekly basis as investors digested the possibility of slower interest rate cuts by the US Fed next year. According to CME's FedWatch tool, the market fully expects the US Fed to cut interest rates at the upcoming meeting, but the probability of another cut in January is only about 24%, with March being the most likely timing for the next cut. Domestically, positive signals continue to emerge. At the China Economic Annual Conference on December 14, the central bank stated that it would moderately increase monetary policy support, implement RRR cuts and interest rate cuts at appropriate times, and moderately strengthen the supportive stance of next year's monetary policy based on this year's supportive measures.

On the fundamentals side, high aluminum production costs have led to partial capacity reductions on the supply side. On the demand side, domestic downstream aluminum demand has entered the off-season, and aluminum semis exports in December may see a significant decline due to earlier export rush. Both domestic and overseas demand are weakening. In terms of inventory, the off-season and increased arrivals in north-west China have heightened the risk of inventory buildup. In the short term, aluminum prices are expected to fluctuate, with attention on macroeconomic developments and aluminum cost trends.

Lead

SHFE/LME Price Ratio Expands, Focus on the Potential Opening of Refined Lead Import Window [SMM Lead Morning Comment Dec 16]

Last Friday, LME lead opened at $2,005/mt and fluctuated downward during the Asian session; in the European session, LME lead rose initially but then declined, hitting a low of $1,994.5/mt. Bulls increased positions during the late session, pushing prices to a high of $2,016/mt, and LME lead finally settled at $2,013.5/mt, up 0.62%.

Last Friday evening, the most-traded SHFE lead 2501 contract opened lower at 17,355 yuan/mt and briefly touched a high of 17,370 yuan/mt during the early session. Due to the delivery of the SHFE lead 2412 contract and the accumulation of social inventories of lead ingots, longs reduced positions, driving SHFE lead to a low of 17,270 yuan/mt, and it eventually closed at 17,315 yuan/mt, down 0.69%.

Macro side, PBOC: By the end of November, the broad money (M2) balance stood at 311.96 trillion yuan, up 7.1% YoY. In the first 11 months of 2024, RMB loans increased by 17.1 trillion yuan, RMB deposits rose by 19.39 trillion yuan, and the cumulative increase in social financing scale was 29.4 trillion yuan, 4.24 trillion yuan less than the same period last year. CSRC: Firmly implement the important requirement of "stabilizing the real estate and stock markets" and effectively maintain the stability of the capital market. Wang Xin, Director of the Research Bureau of the PBOC: Will implement RRR cuts and interest rate cuts at an appropriate time and increase monetary and credit supply.

Fundamentals, the SHFE lead 2412 contract is delivered today, with suppliers transferring inventory to delivery warehouses, leading to an expected increase in social inventories of lead ingots. Meanwhile, secondary lead smelters are stocking up on scrap ahead of the year-end, and battery scrap prices are more likely to rise than fall. Cost factors may slow down the decline in lead prices. Additionally, the SHFE/LME price ratio has expanded, and attention should be paid to the potential opening of the refined lead import window.

Zinc

Tug-of-War Between Longs and Shorts, Zinc Prices Maintain Fluctuating Trend [SMM Zinc Morning Comment Dec 16]

Last Friday, the Bank of Japan reportedly considered delaying interest rate hikes; Vladimir Putin stated that Russia was ready for a full-scale counterattack; Israel and Hamas might reach an agreement on the exchange of detainees by the end of this month; the Nasdaq 100 Index announced its annual component adjustment results; China's cumulative increase in social financing scale for the first 11 months reached 29.4 trillion yuan; the China Securities Regulatory Commission emphasized the importance of firmly implementing the key requirement to "stabilize the real estate and stock markets"; Wang Xin, Director of the Research Bureau of the People's Bank of China, stated that RRR cuts and interest rate cuts would be implemented at an appropriate time; the Ministry of Finance announced plans to adopt a more proactive fiscal policy next year.

Last Friday, LME zinc opened at $3,081.5/mt. In the early session, LME zinc briefly consolidated along the daily moving average before its center shifted downward to test a low of $3,060.5/mt. Subsequently, bulls entered at lower levels, pushing LME zinc to fluctuate upward, with its center operating above the daily moving average. During the European trading session, it reached a high of $3,120/mt. Entering the night session, bears entered while longs closed positions, causing the center of LME zinc to shift downward to around $3,090/mt. It eventually closed higher at $3,089.5/mt, up $9/mt or 0.29%. Trading volume decreased to 8,183 lots, and open interest fell by 3,711 lots to 233,000 lots. Last Friday, LME zinc recorded a small bullish candlestick, with resistance from the 5-day and 10-day moving averages above and support from the 20-day moving average below. Overnight, LME inventory decreased by 5,150 mt to 268,550 mt, a decline of 1.88%, marking a reduction in LME inventory. Last Friday, the strengthening US dollar pressured the performance of base metals, but the reduction in LME inventory provided support for LME zinc, which maintained a fluctuating trend.

Last Friday, the most-traded SHFE zinc 2501 contract opened higher at 25,870 yuan/mt. In the early session, shorts entered, suppressing SHFE zinc to fluctuate downward, with its center operating below the daily moving average. After testing a low of 25,725 yuan/mt, its center fluctuated around 25,770 yuan/mt. It eventually closed higher at 25,760 yuan/mt, up 65 yuan/mt or 0.25%. Trading volume decreased to 74,921 lots, while open interest increased by 305 lots to 127,000 lots. Last Friday, SHFE zinc stopped rising and started to fall, with support from the 10-day moving average below, but the MACD bullish bar narrowed. The national policies to stabilize the real estate and stock markets, coupled with loose fiscal and tax policies, kept macro sentiment moderate. Zinc prices fluctuated at highs, but on the fundamentals side, the loose supply weighed on zinc prices, limiting their upward movement.

Tin

SHFE Tin Night Session Opens Low and Moves Lower; Spot Market Transactions Expected to Recover [SMM Tin Morning Brief Dec 16]

During last Friday's night session, SHFE tin prices opened low and moved lower, showing overall weakness. Nevertheless, downstream enterprises' procurement enthusiasm was not fully ignited. Most enterprises only showed mild interest in prices, with limited inquiries and just-in-time procurement activities, while some adopted a pricing strategy afterward. Last week, most downstream enterprises maintained a cautious procurement attitude, with low purchase volumes. Actual demand exceeded the weekly procurement volume, leading to a decline in inventory. If SHFE tin prices continue to decline or remain at current levels, downstream enterprises are expected to start purchasing and restocking. From the overall trading situation, market activity was sluggish last week, with a subdued trading atmosphere, and most trading enterprises recorded daily trading volumes of less than one truckload. Looking ahead, if SHFE tin prices remain weak and range-bound, the spot market is expected to improve the current mediocre trading atmosphere.

Nickel

Last week, nickel prices fluctuated, with spot prices at 126,000-133,000 yuan/mt and SHFE nickel at 124,000-130,000 yuan/mt. During the week, nickel prices rose slightly under the dual influence of favorable Indonesian nickel resource policies and domestic policies. On the fundamentals side, there were no structural changes WoW, and the overall sentiment remained bearish.

In the spot market: Last week, the rise in nickel prices and the slightly tightened supply of domestically produced refined nickel plates increased the pick-up costs for traders. Spot premiums/discounts hit a new short-term high, further impacting the already sluggish spot market. Meanwhile, imported nickel premiums/discounts remained relatively stable, improving procurement cost-effectiveness. Overall, spot transactions were relatively subdued.