SMM Morning Comment for Base Metals (Nov 23)  

Copper

LME copper prices opened at $8405.5/mt and closed at $8376.5/mt in overnight trading, a drop of 1.1%, with the low-end of $8327/mt and the high-end of $8424/mt. Trading volume was 18,000 lots, and open interest stood at 262,000 lots. The most active SHFE 2401 copper contract prices opened at 68020 yuan/mt and closed at 67720 yuan/mt last evening, down 0.44%, with the high-end of 67970 yuan/mt and the low-end of 67550 yuan/mt. Trading volumes stood at 29,000 lots and open interest stood at 156,000 lots.

On the macro front, The US initial jobless claims recorded 209,000 in the week ending November 18, lower than expected 226,000, a new low since the week ending October 14. Continued initial jobless claims in the United States fell for the first time in two months. Perhaps because the market believes that the U.S. labor market is not cooling as quickly as expected, the U.S. dollar index rebounded from a two-and-a-half-month low. In terms of fundamentals, the premiums and discounts in East China fell as expected yesterday, and the market was bearish on the market outlook. Supplies from sellers increased, and downstream procurement also picked up. If the price spread between front-month and next-month contracts can remain stable, it is expected that spot premiums and discounts in East China will remain stable; inventories in South China have fallen for two consecutive days, combined with the decline in copper prices, sellers kept prices firm. But downstream processing companies do not buy it. Actual transactions were quiet. At present, the price difference between Shanghai and Guangdong is widening, and some supply from East China may be sent to South China in the near term. In terms of consumption, demand in East China has increased due to the fall in spot quotes. There will be limited upside room for copper prices as the US dollar weighed.

Aluminium

The most-traded SHFE 2312 aluminum contract opened at 18860 yuan/mt at Wednesday’s night session, with its low and high at 18730 yuan/mt and 18860 yuan/mt before closing at 18740 yuan/mt, down 70 yuan/mt, or 0.37%. LME aluminum opened at $2256.5/mt in the previous trading day, with its low and high at $2216.5/mt and $2257.5/mt respectively before closing at $2211.5/mt, down $34/mt or 1.51%.

On the macro level, expectations for further interest rate hikes in Europe and the US have cooled, and China continues to promote economic recovery. In terms of fundamentals, Yunnan's production reduction coincides with the arrival of the off-season, and both supply and demand are reduced. SHFE aluminum may struggle to find support in the short term.

Lead

LME lead opened at $2270.5/mt and stabilized during the Asian trading hours yesterday. During the European trading hours, LME lead briefly hit the lowest of $2214/mt, closing down 2.34% at $2216.5/mt overnight.

The most active SHFE 2401 lead contract prices opened at 16640 yuan/mt last evening, and closed at 16530 yuan/mt, a drop of 1.28%, with the high-end of 16645 yuan/mt and the low-end of 16475 yuan/mt.

Zinc

LME zinc opened at $2546/mt last night, touching a low of $2477/mt. LME zinc closed down $50.5/mt or 1.98% at $2499/mt. The trading volume grew to 11369 lots, and open interest lost 3334 lots to 202,000 lots. Overnight LME inventories once again increased sharply by 68,100 mt to 210,850 mt, an increase of 47.71%. This, combined with the rebound of the US dollar index and plunging crude oil weakened LME zinc.

The most-traded SHFE 2401 zinc contract opened at 20920 yuan/mt overnight, and touched a low of 20930 yuan/mt before finishing at 20910 yuan/mt, down 145 yuan/mt or 0.69%. Trading volume was down to 52954 lots, and open interest gained by 363 lots to 92827 lots. Recent supply-side pressure and weakening demand. SHFE zinc fell below the support of 21,000 yuan/mt.

Nickel

Overnight, the most-traded SHFE nickel contract opened at 132510 yuan/mt, and closed at 129410 yuan/mt, down 3100 yuan/mt. Trading volume fell by 1488 lots, and open interest decreased by 10238 lots. On the macro front, the U.S. dollar index continues to weaken and has fallen for more than a week, which has a positive effect on commodities. However, growing supply and weak demand have prevented SHFE nickel from rising, which may move rangebound and then go down.

Tin

SHFE 2312 tin contract fell to 205010 yuan/mt overnight and closed at 205640 yuan/mt, down 0.92%.
Yesterday, spot premiums and discounts in domestic spot market for various tin ingot brands were as follows: Small brand tin ingots were offered at discounts of 200 and premiums of 300 yuan/mt over SHFE 2312 tin contract, versus premiums of 400-700 yuan/mt for delivery brands, premiums of 900-1100 yuan/mt for Yunxi brand, and discounts of 500-700 yuan/mt imported brand tin ingots. Tin prices continued to fall yesterday, and the purchasing enthusiasm of downstream companies has increased slightly. However, some companies still maintained a wait-and-see attitude. Most trading companies traded 10-20 mt in the morning.