SMM Morning Comment For SHFE Base Metals (Dec 24)

SHANGHAI, Dec 24 (SMM) –

Copper

US Dollar Index Hovered at High Levels, Copper Prices Under Pressure Overnight [SMM Copper Morning Comment Dec 24]

Overnight, LME copper opened at $8,973.5/mt, briefly hitting a high of $8,982.5/mt at the beginning of the session before fluctuating downward throughout the trading hours. Near the session's end, it touched a low of $8,900/mt and then slightly rebounded to close at $8,936.5/mt, down 0.08%. Trading volume reached 10,000 lots, and open interest stood at 262,000 lots. Overnight, the most-traded SHFE copper 2501 contract opened at 73,980 yuan/mt, briefly hitting a high of 74,100 yuan/mt at the beginning of the session before fluctuating downward throughout the trading hours. Near the session's end, it touched a low of 73,730 yuan/mt and finally closed at 73,820 yuan/mt, down 0.28%. Trading volume reached 16,000 lots, and open interest stood at 102,000 lots. Macro side, the US Fed's expected pace of interest rate cuts is more cautious than market expectations, driving up the US dollar and US Treasury yields. The US dollar index continued to hover near a two-year high, while major US stock indices closed higher on Monday. Analysts noted that the US dollar is unlikely to weaken until the market becomes more dovish than the Fed, which will exert some pressure on copper prices. Fundamentally, the spot market remained sluggish. Meanwhile, due to the approach of transactions involving cargoes with invoices dated next month and year-end capital recovery needs, the center of spot premiums continued to decline. According to the SMM survey, domestic inventories resumed building over the past weekend. As of Monday, December 23, copper inventories in major regions across China tracked by SMM increased by approximately 200 mt compared to last Thursday, reaching 99,400 mt. However, total inventories were 49,000 mt higher than the 50,400 mt recorded in the same period last year. In terms of prices, the market trend is currently influenced by global central bank meetings. Diverging expectations among investors regarding next year's interest rate cuts, coupled with the US dollar index hovering at high levels, are expected to keep copper prices under pressure today. During the day, attention will focus on the revised US November building permits month-on-month rate and the preliminary US November durable goods orders month-on-month rate.

Aluminum

US Dollar Index Hovers at Two-Year High, Aluminum Ingot Inventory Continues to Decline [SMM Aluminum Morning Meeting Summary]

Overnight, the most-traded SHFE aluminum 2502 contract opened at 19,945 yuan/mt, hit a high of 19,965 yuan/mt, a low of 19,815 yuan/mt, and closed at 19,835 yuan/mt, down 80 yuan/mt or 0.4% from the previous trading day. Yesterday, LME aluminum opened at $2,542/mt, reached a high of $2,562.5/mt, a low of $2,515/mt, and closed at $2,538.5/mt, down $3.5/mt or 0.13%.

Summary: On the macro front, as market inflation data eases, expectations for US Fed interest rate cuts in March next year have resurfaced. However, the market is weighing the prospect of smaller rate cuts next year, with the US dollar index hovering near its two-year high, putting pressure on base metals. On the fundamentals side, domestic aluminum supply pressure has recently eased slightly, with a small decline in operating capacity. Some aluminum smelters in Sichuan and Guangxi have reported capacity technological transformations or production cuts due to losses. On the inventory side, low aluminum prices have stimulated pre-holiday stockpiling by downstream buyers, combined with year-end inventory clearance by suppliers, keeping aluminum ingot inventories on a destocking trend. On the demand side, market rigid demand continues to weaken. Environmental protection inspections have resumed, leading to a downward adjustment in the weekly operating rate of the aluminum plate/sheet and strip sector, while the aluminum extrusion industry has also become increasingly sluggish, with a strong off-season atmosphere. Overall, on the macro front, influenced by expectations for US Fed interest rate cuts next year, and on the fundamentals side, despite slightly eased supply pressure, weak demand during the off-season and growing risks of inventory buildup in the social inventory are expected to keep aluminum prices fluctuating downward in the short term.

Lead

Overseas Market Welcomes Christmas, Domestic Lead Trading Focuses on Fundamentals [SMM Lead Morning Meeting Comment Dec 24]

Overnight, LME lead opened at $1,983.5/mt. Against the backdrop of continued destocking of lead ingots, LME lead fluctuated upward, breaking through the $2,000/mt mark during the day and reaching a weekly high of $2,006/mt. However, the US dollar index surged strongly at night, putting pressure on base metals, and LME lead quickly pulled back to around $1,980/mt before finally closing at $1,993/mt, up 0.61%. Additionally, today is Christmas Eve, and the LME will close at 20:30 tonight.

Overnight, the most-traded SHFE lead 2502 contract opened at 17,415 yuan/mt. Against the backdrop of production cuts on the supply side, lead warehouse warrant inventory unexpectedly increased. SHFE lead initially dropped to 17,370 yuan/mt. Subsequently, the market continued to trade on supply-side environmental protection-driven production restrictions, with SHFE lead moving above 17,400 yuan/mt before finally closing at 17,485 yuan/mt, down 0.09%. Its open interest reached 61,421 lots, a decrease of 694 lots compared to the previous trading day.

Macro side, China's Premier stated that next year, China's economic and social development will still face many difficulties and challenges. Efforts should be made to seize time against various uncertainties, and for confirmed tasks, the earlier the better, accelerating progress to continuously consolidate the momentum of economic recovery and improvement. Additionally, Nissan and Honda officially initiated merger talks, expected to be completed by 2026, which would make it the third largest globally after the merger. Germany's Volkswagen reached a compromise with labor unions, promising not to close factories but planning comprehensive reforms of its German operations and cutting 35,000 jobs.

Fundamentally, regions such as Anhui, Henan, and Hebei recently issued heavy smog warnings, while Hunan faced environmental protection inspections. Both primary and secondary lead enterprises experienced production cuts or shutdowns, tightening lead ingot supply and prompting downstream enterprises to shift to consuming social warehouse inventory, leading to an expanded decline in lead ingot social inventory. Yesterday, Anhui, Henan, and other regions issued further air pollution warnings, affecting lead smelting enterprises' production and transportation to varying degrees. Meanwhile, as the year-end approaches, large enterprises are expected to close accounts and check inventory, reducing downstream procurement enthusiasm, and market trading may trend towards muted activity.

Zinc

Domestic Spot Supply Shortage Persists, Expected to Support Zinc Prices [SMM Zinc Morning Comment Dec 24]

Overnight, the Kremlin spokesperson stated that there are no plans yet to arrange a meeting between Putin and Trump; France announced the list of members for its new government; Iran may hold talks with the UK, France, and Germany on the nuclear issue in January next year; the General Office of the CPC Central Committee and the State Council issued a statement on developing general aviation and the low-altitude economy; the US launched a Section 301 investigation into policies related to China's chip industry, with a response from the Ministry of Commerce.

Overnight, LME zinc opened at $2,976/mt, immediately dipped to a low of $2,975/mt, then fluctuated upward, briefly dipping below the daily moving average before shorts reduced positions, allowing LME zinc to climb to a high of $3,028/mt. During the night session, LME zinc fluctuated downward, ultimately closing up at $2,998.5/mt, an increase of $26/mt or 0.87%. Trading volume decreased to 67,497 lots, and open interest fell by 2,109 lots to 228,000 lots. Overnight, LME zinc recorded a bullish candlestick, with resistance from the 10-day and 60-day moving averages above and support from the lower Bollinger Band below. LME inventories decreased by 2,150 mt to 251,975 mt, a decline of 0.85%. The continuous reduction in overseas inventories is expected to provide some support for zinc prices. In the short term, LME zinc is likely to maintain a fluctuating trend, with further macroeconomic information worth monitoring.

Overnight, the most-traded SHFE zinc 2502 contract opened at 25,065 yuan/mt. At the beginning of the session, SHFE zinc fluctuated rangebound around the daily moving average, reaching a high of 25,150 yuan/mt. Subsequently, with increased short positions, SHFE zinc fluctuated downward below the daily moving average. By the end of the session, with reduced long positions, SHFE zinc continued to decline, hitting a low of 24,955 yuan/mt and ultimately closing down at 24,960 yuan/mt, a decrease of 65 yuan/mt or 0.26%. Trading volume decreased to 56,040 lots, while open interest increased by 3,577 lots to 132,000 lots. Overnight, SHFE zinc recorded a bearish candlestick with no lower shadow, facing resistance from the middle Bollinger Band above and support from the 40-day moving average below. Currently, domestic spot supply continues to decline, with the shortage persisting, which is expected to support SHFE zinc fluctuating at highs. Zinc prices are anticipated to hover at highs in the short term.

Tin

Last Night SHFE Tin Prices Fluctuated Downward, Likely to Maintain a Fluctuating Downward Trend [SMM Tin Morning Brief Dec 24]

In yesterday's night session, the price of the most-traded SHFE tin contract showed a fluctuating downward trend. After the opening, constrained by resistance levels above, it failed to achieve an effective breakout. Subsequently, in the absence of new bullish news, bullish sentiment in the market gradually weakened, with bearish forces gaining the upper hand and driving prices lower. From a technical perspective, the price of the most-traded SHFE tin contract yesterday was suppressed by the 5-day moving average, while the 10-day moving average provided some support below. The MACD indicator showed a shortening of red bars, indicating a weakening of bullish momentum. The KDJ indicator formed a death cross in the overbought territory, suggesting a further correction in prices.

In the spot market, tin prices followed the trend of the futures market and also declined. On the demand side, downstream enterprises showed moderate purchase willingness, mainly purchasing as needed. Due to the decline in SHFE tin futures prices, some downstream enterprises restocked at lower levels, but overall procurement volume did not see a significant increase.

In summary, the price of the most-traded SHFE tin contract fluctuated downward yesterday, with spot market tin prices following suit. Given relatively ample supply and limited demand improvement, SHFE tin prices are expected to maintain a fluctuating downward trend in the short term.