SMM Morning Comment For SHFE Base Metals On December 31

SHANGHAI, December 31 (SMM) –

Copper

Overnight, LME copper opened at $8,961.5/mt, briefly hitting a high of $8,966/mt at the start of trading before fluctuating downward, reaching a low of $8,905.5/mt during the session. It then rebounded slightly towards the close, ultimately settling at $8,933.5/mt, with open interest at 262,000 lots. Overnight, the most-traded SHFE copper 2502 contract opened at 73,960 yuan/mt, initially climbing to a high of 74,010 yuan/mt before fluctuating downward, hitting a low of 73,740 yuan/mt near the close, and finally settling at 73,770 yuan/mt, down 0.54%, with trading volume at 24,000 lots and open interest at 150,000 lots. Macro side, the US dollar index hovered at highs on expectations of Trump's policies, weighing on copper prices. Domestically, the bond issuance volume of three policy banks in Q1 next year is expected to hit a record high. Fundamentally, over the weekend, arrivals of both imported and domestically produced copper increased, while year-end consumption remained weak. As of Monday, December 30, SMM copper inventories in major regions nationwide rose by 7,700 mt compared to last Thursday, reaching 113,100 mt. In summary, year-end consumption remains sluggish, and inventories are increasing, so copper prices are expected to see limited gains today.

Aluminum

Futures Market: Overnight, the most-traded SHFE aluminum 2502 contract opened at 19,805 yuan/mt, hitting a high of 19,815 yuan/mt and a low of 19,750 yuan/mt, before closing at 19,765 yuan/mt, down 40 yuan/mt or 0.20% from the previous trading day. On Monday, LME aluminum opened at $2,551/mt, reached a high of $2,567/mt and a low of $2,544.5/mt, and closed at $2,550/mt, down $7/mt or 0.27%.

Summary: On the macro front, the European Central Bank may slow its pace of interest rate cuts, and market expectations for the extent of US Fed rate cuts next year remain pessimistic, putting continued pressure on base metals. On the fundamentals side, in December, multiple aluminum smelters in Sichuan and Guangxi reduced production, while some capacity restarts were delayed. However, production still showed YoY growth. On the demand side, market demand continued to weaken during the off-season, with operating rates in the aluminum processing industry declining further. Overall, the macro front remains uncertain with the US Fed's unclear rate cut pace and the European Central Bank's delayed rate cuts. On the fundamentals side, although supply-side pressure has slightly eased, weak demand during the off-season and growing risks of inventory buildup in social warehouses continue to weigh on the market. In the short term, aluminum prices are expected to fluctuate downward.

Lead

Overnight, LME lead opened at $1,966.5/mt. With shorts increasing positions, LME lead was under pressure and fluctuated downward along the intraday moving average, hitting a low of $1,945/mt before closing at $1,946/mt, down $20/mt or 1.02%.

Overnight, the most-traded SHFE lead 2502 contract opened at 16,790 yuan/mt. After briefly touching a high of 16,810 yuan/mt at the beginning of the session, it weakened again, hitting a low of 16,740 yuan/mt. It later rebounded and closed at 16,775 yuan/mt, down 55 yuan/mt or 0.33%.

Macro side, the US dollar index remained range-bound as traders continued to price in the possibility of fewer interest rate cuts by the US Fed in 2025. Fundamentals side, the impact of environmental protection-driven production restrictions eased, and secondary lead smelting enterprises gradually plan to resume production. However, environmental restrictions in Hunan persist, with only a few primary lead smelters expected to resume after New Year’s Day. Lead ingot supply remains limited, and smelters in the region maintained a premium of 300 yuan/mt while being reluctant to sell. After last Friday's sharp decline in lead prices, this week saw continued downward fluctuations. Some downstream enterprises showed interest in buying the dip as needed, but refined lead supply remained tight in certain areas. Smelter inventories and social inventories of lead ingots continued to decline. After the New Year holiday, attention should be paid to the resumption of regular operations by downstream enterprises following the resolution of year-end account settlements and inventory checks, as well as pre-holiday stocking by dealers. The lead market may see a simultaneous increase in supply and demand.

Zinc

Overnight, Trump expressed full support for Johnson's re-election as Speaker of the US House of Representatives; the US Treasury Secretary announced an additional $3.4 billion budget aid package for Ukraine; Brazil's central bank intervened repeatedly to support its currency, which has still depreciated 22% this year; South Korea's acting president Choi Sang-mook was placed under police investigation; the central bank issued its first penalties for bond market violations, with three institutions under investigation; three policy banks are set to issue a record-high volume of bonds in Q1 next year; the National Association of Financial Market Institutional Investors (NAFMII) recommended stricter measures against "short essays" in the capital market; reports indicated that BYD has launched a humanoid robot project, to which the company responded with "no comment."

Overnight, LME zinc opened at $3,036.5/mt. In early trading, longs increased their positions, driving LME zinc upward and consolidating around $3,050/mt, with a high of $3,061/mt during the session. By the night session, longs reduced their positions, and LME zinc declined throughout, hitting a low of $3,016/mt near the session's end and closing down at $3,017/mt, a decrease of $23/mt or 0.76%. Trading volume increased to 7,072 lots, while open interest decreased by 1,315 lots to 224,000 lots. Overnight, LME zinc formed a long upper shadow bearish candlestick. LME inventory decreased by 6,625 mt to 237,875 mt, a drop of 2.71%. The US dollar index continued to hover near a two-year high, driven by market expectations that Trump's policies, including deregulation, tax cuts, higher tariffs, and stricter immigration controls, would persist, suppressing LME zinc's performance. Domestic consumption also weakened seasonally, and the market awaited guidance from China's manufacturing PMI. LME zinc is expected to fluctuate today.

Overnight, the most-traded SHFE zinc 2502 contract opened at 25,290 yuan/mt. SHFE zinc initially moved upward but lacked upward momentum, causing its center to shift downward. Later, with longs increasing their positions, SHFE zinc's center moved upward near the daily moving average for consolidation. Subsequently, shorts increased their positions, and SHFE zinc fluctuated downward, hitting a low of 25,255 yuan/mt and closing down at 25,270 yuan/mt, a decrease of 55 yuan/mt or 0.22%. Trading volume decreased to 50,690 lots, while open interest fell by 329 lots to 140,000 lots. Overnight, SHFE zinc formed a small bearish candlestick, with resistance from the 5-day moving average and support from the 10-day moving average. Fundamentally, smelters have largely completed winter stockpiling, raw material inventory has grown, and the tight ore supply situation has further eased. Consumption also showed seasonal declines, with end-user construction gradually wrapping up as the Chinese New Year approaches. These factors weakened fundamental support for zinc. However, warehouse warrants remain relatively low. SHFE zinc saw a slight decline and awaits further macroeconomic guidance. It is expected to consolidate today.

Tin

Yesterday, SHFE tin futures prices exhibited a steady performance. After the opening, as the market gradually became active, prices began to fluctuate but maintained an overall stable trend. During trading, SHFE tin futures prices once touched the intraday high, indicating that the bullish momentum in the market remained strong. However, prices dropped back slightly afterward, possibly due to some investors taking profits. Despite this, SHFE tin futures prices remained at relatively high levels, reflecting the market's optimistic outlook on tin resources. By the close, the price of the most-traded SHFE tin futures contract settled at 246,850 yuan/mt, up 2,080 yuan/mt from the previous day's settlement price, marking a 0.85% increase. Although this gain was not significant, it was notable in the recent market environment, showcasing the stability and vitality of the tin market. From a technical analysis perspective, SHFE tin futures prices successfully broke through recent resistance levels yesterday, which could pave the way for further increases. However, investors should closely monitor market dynamics to guard against potential risks. Overall, the SHFE tin futures market performed impressively yesterday, with prices steadily rising. Supported by both fundamentals and technical factors, the market remains optimistic about the future trend of SHFE tin. Nevertheless, investors should remain cautious and adjust strategies flexibly based on actual conditions.

Nickel

Spot Premiums/Discounts: The mainstream spot premium quotation range for Jinchuan Nickel No.1 was 3,400-3,500 yuan/mt, with an average premium of 3,450 yuan/mt, down 50 yuan compared to the previous trading day. The quotation range for Russian nickel was 0 to 100 yuan/mt, with an average premium of -50 yuan/mt, up 100 yuan compared to the previous trading day.

Futures: In the morning, nickel prices fluctuated downward at low levels, dropping 1,200 yuan to 124,540 yuan, down 0.95%.

Today, nickel prices fluctuated rangebound, down compared to the previous trading day. Jinchuan brand nickel premiums remained largely stable overall, but as the sentiment of short-term supply tightening gradually eased in the market, premiums showed slight loosening. Spot premiums/discounts for other nickel plate brands remained largely stable this month. Approaching year-end, overall market transactions were sluggish.

Price Spread With Nickel Sulphate: Today, nickel briquette prices were 123,600-124,000 yuan/mt, down 1,550 yuan/mt compared to the previous trading day's spot price. Nickel sulphate remained at a discount to refined nickel.