SMM Morning Comment For SHFE Base Metals October 24

Copper

LME copper opened at $7903.5/mt overnight, with its session low and high at $7890/mt and $7995/mt before closing up 0.57% at $7985.5/mt. Trading volume was 20,000 lots, and open interest was 267,000 lots. SHFE 2312 copper contract opened at 65920 yuan/mt overnight, with its session low and high at 65820 yuan/mt and 66320 yuan/mt before closing up 0.5% at 66250 yuan/mt. Trading volume was 42,000 lots, and open interest was 155,000 lots. The US dollar index once fell to 105.51 before closing down 0.52% at 105.60. Market is waiting for upcoming US GDP data and inflation data. As of October 23, the copper inventory across China’s major trading markets decreased by 11,000 mt from last Friday to 84,300 mt. Despite continued inflows of imported copper, strong downstream demand and cargoes being moved to south China drove stocks in east China to fall sharply. Stocks in south China rose, but local downstream consumption was moderate. The price difference between copper cathode and copper scrap was small and demand for the former may remain strong. Copper prices are not expected to rebound in the short term.

Aluminum

Overnight, the most-traded SHFE 2311 aluminum contract opened at 19000 yuan/mt, with its low and high at 18870 yuan/mt and 19000 yuan/mt before closing at 18905 yuan/mt, up 55 yuan/mt or 0.29%. LME aluminum opened at $2181.5/mt on Monday, with its low and high at $2162/mt and $2189/mt respectively before closing at $2176/mt, down 0.18%.
There are many macro disturbing factors: the US dollar index fell sharply and crude oil prices also fell, but the short-term Fed rate hike expectations swing and the Palestinian-Israeli conflict intensified market uncertainty. Operating aluminum capacity in China is now 42.94 million mt, close to a peak, meaning no significant growth will be seen in short term. Downstream orders improved after the National Day holiday, but fell short of expectations. Aluminum ingot and billet pick-ups from social warehouses decreased last week. Aluminum prices are expected to move rangebound in the short term.
Lead

On Monday, LME lead opened at $2093/mt, with low and high at $2066.5/mt and $2105.5/mt, and finally closed at $2098/mt, up $ 7.5/mt, or 0.36%. The most-traded SHFE lead contract opened at 16500 yuan/mt overnight, with its session low and high at 16425 yuan/mt and 16500 yuan/mt, closing at 16445 yuan/mt, down 0.48%. The decline was caused by growing LME lead inventory and prices.

Zinc

The National People's Congress on Tuesday is set to approve plans by the Ministry of Finance to issue over 1 trillion yuan government bonds to boost infrastructure investment and economic growth. Navigator Group, the world's second-largest asset manager, is bullish on longer-term U.S. Treasuries after a severe sell-off in bonds this year, betting the Fed's rate-hike cycle is over and the economy will slow next year. The preliminary euro zone consumer confidence index fell to -17.9 in October. Germany's economy is likely to contract in the third quarter amid falling industrial production, shrinking construction and weak consumption, the Bundesbank said in its monthly report. Overnight, LME zinc opened at $2435.5/mt, falling below the 5-day moving average, and closed down 0.35% at $2430/mt. Trading volume was 7861 lots, and open interest decreased 4421 lots to 203,000 lots. The Federal Reserve released the signal that the future interest rate cut will be delayed. On the other hand, the Palestinian-Israeli conflict has escalated, hence the panic in the capital market has intensified. Under the comprehensive influence of macro, zinc prices may go down. Overnight, the most-traded SHFE 2312 zinc contract opened at 20770 yuan/mt, and closed up 90 yuan/mt or 0.43% at 20880 yuan/mt. Trading volume was 45,000 lots, and open interest rose 1141 lots to 71,000 lots. Domestic zinc ingot social inventories are currently 102,600 mt. Yet, with inflows of imported zinc ingots and arrivals of zinc ingots from domestic smelters after they have resumed their normal production, inventories will gradually build up and supply in the spot market will be ample, weakening support to zinc price.

Tin

SHFE 2311 tin contract rose to 214750 yuan/mt overnight and closed at 213670 yuan/mt, down 0.55%. Yesterday, spot premiums and discounts in domestic spot market for various domestic tin ingot brands changed little. Small brand tin ingots were offered at premiums of 100-300 yuan/mt, versus premiums of 400-700 yuan/mt for delivery brands, premiums of 1000-1,200 yuan/mt for Yunxi brand, and discounts of 500-600 yuan/mt for imported brand tin ingots. Downstream buying interest picked up a little after tin prices fell, but overall trades remained thin.

Nickel

Overnight, the most-traded SHFE nickel contract opened at 146170 yuan/mt, and closed at 148710 yuan/mt, up 2710 yuan/mt. Trading volume fell by 49492 lots, and open interest decreased by 15377 lots. On the macro side, the dovish speech of the Federal Reserve officials continued to cool the expectations of the Federal Reserve to raise interest rates, and the market's expectations for the interest rate range to remain unchanged in November and December rose to 89.6% and 70.5%. Demand in spot market declined yesterday. Nickel price is expected to rebound slightly.