SMM Morning Comment For SHFE Base Metals (Jan 17)

SHANGHAI, Jan 17 (SMM) –

Copper

Overnight, LME copper opened at $9,259/mt, fluctuated downward initially, and hit a low of $9,210/mt during the session. It then rebounded, fluctuated downward again before recovering, and reached a high of $9,267.5/mt at the session's end, finally closing at $9,245/mt, up by 0.3%. Trading volume reached 20,000 lots, and open interest stood at 286,000 lots. Overnight, the most-traded SHFE copper 2503 contract opened at 76,300 yuan/mt, hit a low of 76,070 yuan/mt early in the session, then fluctuated upward to a high of 76,500 yuan/mt. Subsequently, the center of fluctuations shifted downward, and it finally closed at 76,280 yuan/mt, up by 0.49%. Trading volume reached 27,000 lots, and open interest stood at 167,000 lots. Macro side, the US "terror data" unexpectedly pulled back to 0.4%. US Fed Governor Waller suggested that the possibility of an interest rate cut in March cannot be ruled out, and if data performs well, there could be 3–4 interest rate cuts this year. The US dollar index softened to some extent, providing support for copper prices, while the market is anticipating more favorable domestic consumption policies. Fundamentally, as year-end approaches, high copper prices have led to overall weak market activity, with subdued downstream demand and insufficient pre-holiday stockpiling by downstream enterprises. In summary, physical buying has weakened, and copper prices are expected to face some resistance today.

Aluminum

Overnight, the most-traded SHFE aluminum 2503 contract opened at 20,420 yuan/mt, with a high of 20,450 yuan/mt and a low of 20,360 yuan/mt, closing at 20,370 yuan/mt, up 70 yuan/mt or 0.35%. Overnight, LME aluminum opened at $2,609/mt, with a high of $2,647/mt and a low of $2,594.5/mt, closing at $2,633.5/mt, up $29.5/mt or 1.19%.

Summary: Expectations for US Fed interest rate cuts strengthened again, driving overnight aluminum prices higher. Fundamentals side, pre-holiday concentrated stockpiling by aluminum processing enterprises, coupled with logistics disruptions in some shipping areas, led to aluminum ingot inventory depletion exceeding expectations, providing short-term support for aluminum prices. However, aluminum supply remains stable, and spot alumina prices continue to decline due to ample supply, reducing cost support for the aluminum industry. Demand side, as the Chinese New Year approaches, market demand weakens, and some small and medium-sized aluminum processing plants are nearing holiday closures, introducing uncertainty to the sustainability of inventory destocking. In the short term, attention should remain on the impact of falling spot alumina prices on aluminum costs, as well as downstream holiday schedules and the continuity of pre-holiday stockpiling pace.

Lead

Overnight, LME lead opened at $1,937/mt, fluctuating upward throughout the day. Remarks by US officials regarding an interest rate cut weakened the US dollar index, while LME lead inventory reversed to a decline. During the European session, LME lead's upward momentum strengthened, reaching a peak of $1,978/mt. By the close, LME lead settled at $1,976.5/mt, up by 2.2%.

Overnight, the most-traded SHFE lead 2502 contract opened at 16,665 yuan/mt. In early trading, SHFE lead surged to 16,700 yuan/mt, but consumption was weighed down by the Chinese New Year holiday, causing SHFE lead to give up part of its gains. In the latter half of the trading session, SHFE lead fluctuated between 16,635-16,665 yuan/mt, eventually closing at 16,645 yuan/mt, up by 0.42%. Its open interest reached 25,208 lots, a decrease of 1,862 lots compared to the previous trading day.

Zinc

Overnight, LME zinc opened at $2,878/mt. At the beginning of the session, LME zinc fluctuated downward around the daily moving average, hitting a low of $2,845/mt. During European trading hours, increased long positions pushed LME zinc to fluctuate upward, reaching a high of $2,886/mt. Entering the night session, the center slightly dipped and fluctuated near the daily moving average, eventually closing higher at $2,874/mt, up by $7/mt or 0.24%. Trading volume decreased to 8,472 lots, while open interest increased by 2,431 lots to 220,000 lots. Overnight, LME zinc recorded a small bearish candlestick, with the KDJ indicator expanding upward. US retail sales in December continued to grow, and the labour market remained fundamentally solid at the start of the year, indicating strong economic demand and further reinforcing the US Fed's cautious stance on interest rate cuts this year. LME zinc maintained a fluctuating trend.

Overnight, the most-traded SHFE zinc 2503 contract opened at 23,810 yuan/mt. At the beginning of the session, a tug-of-war between longs and shorts caused SHFE zinc to fluctuate near the daily moving average. Subsequently, increased long positions drove SHFE zinc to fluctuate upward, reaching a high of 23,810 yuan/mt. However, shorts at high levels pressured the center of SHFE zinc downward, eventually closing higher at 23,745 yuan/mt, up by 50 yuan/mt or 0.21%. Trading volume decreased to 68,166 lots, while open interest increased by 1,730 lots to 109,000 lots. Overnight, SHFE zinc recorded a long lower shadow bearish candlestick, with the 5-day moving average forming resistance above. Due to the decline in zinc prices during the week and pre-holiday downstream restocking, SMM social inventory decreased counter-seasonally, providing support for the bottom of zinc prices.

Tin

Last night, the SHFE tin market showed slight fluctuations after opening, oscillating within the range of 246,600 yuan/mt to 248,000 yuan/mt. Reviewing yesterday's spot market, smelters mostly insisted on high prices before the holiday, resulting in limited shipments. Meanwhile, considering the high-level consolidation of SHFE tin prices yesterday, downstream enterprises showed weak purchase willingness, with some opting to place orders at lower prices, leading to reduced trading volume. Traders reported that the total trading volume for the day was sluggish, at only about 10-20 mt, with only a few traders achieving transactions exceeding one truckload. As the trading week draws to a close, the spot market is expected to remain sluggish. With the year-end approaching, logistics and end-user enterprises entering the holiday period may further dampen the spot market.

Nickel Sulphate:

On January 16, the SMM battery-grade nickel sulphate index price was 26,506 yuan/mt, with a quotation range of 26,250-26,970 yuan/mt, and the average price increased compared to yesterday.

In terms of costs, LME nickel prices remained stable today. Currently, profits from producing nickel sulphate using high-grade nickel matte and intermediate products have turned negative. On the demand side, most precursor plants have completed their January nickel salt restocking, with only a small portion still requiring restocking. Market inquiry activity remains weak. On the supply side, nickel salt plants are facing critically low finished product inventories, leading to tight supply. Overall, under the pattern of tight supply and rising costs, prices still have room for further increases.