SMM Morning Comment For SHFE Base Metals (Oct 17)

SHANGHAI, Oct 17 (SMM) –

Copper

Overnight Copper Prices Rebound as Market Awaits More Guidance [SMM Morning Comment]

Overnight, LME copper opened at $9,631/mt, initially fluctuated slightly and reached a high of $9,637/mt. It then fluctuated downward throughout the session, hitting a low of $9,553.5/mt near the close, and finally rebounded slightly to close at $9,591/mt, up 0.75%. Trading volume reached 16,000 lots, and open interest was 278,000 lots. Overnight, the most-traded SHFE copper 2411 contract opened at 76,920 yuan/mt, initially reached a high of 77,150 yuan/mt, then fluctuated downward slightly throughout the session, hitting a low of 76,630 yuan/mt near the close, and finally rebounded slightly to close at 76,870 yuan/mt, up 0.39%. Trading volume reached 22,000 lots, and open interest was 142,000 lots. Macro side, traders currently estimate a 97.2% probability that the US Fed will cut interest rates by 25 basis points in November. The market is also focusing more on the US retail sales and weekly initial jobless claims data to be released tonight, seeking the latest clues on the Fed's monetary easing cycle, leading to a rebound in copper prices. Fundamentally, from the supply side, there has been a continuous large inflow of imported copper into domestic market this week, increasing the supply of spot copper cathode, but traders' activity remains low. Meanwhile, copper prices continue to fluctuate downward, with limited downstream consumption willingness, mainly driven by rigid demand, resulting in overall poor spot market transactions. In terms of prices, the State Council's press conference will be held at 10 a.m. today, and the market is hoping for more support for the real estate sector from China. Copper prices are expected to stabilize today.

Aluminum

Aluminum Prices Maintain Fluctuating Trend, Focus on Recent Changes in Domestic and International Macro Sentiment [SMM Aluminum Morning Meeting Summary Oct 17]

Overnight, the most-traded SHFE aluminum 2411 contract opened at 20,755 yuan/mt, reaching a high of 20,800 yuan/mt and a low of 20,735 yuan/mt, and closed at 20,780 yuan/mt, up 75 yuan/mt or 0.36% from the previous close. On Wednesday, LME aluminum opened at $2,585/mt, hitting a high of $2,601.5/mt and a low of $2,571/mt, and closed at $2,587.5/mt, up $16/mt or 0.62%.

Summary: On the macro front, data released by the US Department of Labor on Wednesday showed that import prices fell by 0.4% last month, the largest decline since December 2023, due to a significant drop in energy product prices. This suggests an improved inflation outlook, and the US Fed is expected to continue cutting interest rates. Traders currently see a 97% chance of a 25 basis point rate cut in November and a 3% chance of a pause. Domestically, a State Council press conference will be held at 10 a.m. today, with the market hoping for more support for the real estate sector from China. On the fundamentals side, domestic aluminum supply continues to increase slightly. On the cost side, the spot alumina market remains tightly balanced, and domestic aluminum production costs are expected to increase in October. On the demand side, downstream operating rates are generally stable, with inventory falling back to pre-holiday levels during the week, and market liquidity remains tight. Overall, the supply-demand mismatch in the aluminum market is not significant, and a short-term fluctuating trend is expected to be maintained, with attention to changes in domestic and international macro sentiment and end-use consumption.

Lead

Seasonal Return of Automobile Consumption Improves Lead-Acid Battery Sales Orders [SMM Lead Morning Comment]

Overnight, LME lead opened at $2,079.5/mt. Due to the strengthening of the US dollar index, LME lead initially fell under pressure to $2,071.5/mt before rebounding. During the European session, it peaked at $2,110.5/mt and slightly dropped back at the end, closing at $2,085/mt, up 0.31%.

Overnight, the most-traded SHFE lead 2411 contract opened at 16,830 yuan/mt. It briefly touched a high of 16,890 yuan/mt at the beginning of the session. However, due to longs reducing positions, LME lead plunged to a low of 16,655 yuan/mt, finally closing at 16,700 yuan/mt, with no change in price.

Macro side, the UK's CPI annual rate for September recorded 1.7%, the lowest level since April 2021. The market expects the Bank of England to cut interest rates by 45 basis points by the end of the year, compared to 37 basis points before the data release. During his inspection in Fujian, Xi Jinping emphasized the need to fully focus on economic work in the fourth quarter and strive to achieve the annual economic and social development goals.

Fundamentally, the seasonal return of automobile consumption combined with policies such as "trade-in" has improved lead-acid battery sales orders, boosting the operating rate of battery producers. However, due to the rise in lead prices, downstream enterprises were cautious and only purchased lead ingots as needed, resulting in mediocre spot transactions. As some primary and secondary lead smelters resume operations after maintenance, the supply of lead ingots is gradually becoming more abundant, providing more options for downstream buyers. Overall, lead prices are expected to fluctuate upward in the short term.

Zinc

Supply Weakness Continues to Support SHFE Zinc at High Levels [SMM Zinc Morning Comment Oct 17]

US Official: Israel to Retaliate Against Iran by November 5; Oil Spill Occurs Near Iran's Largest Oil Export Terminal in the Persian Gulf; Mayor of Nabatieh, Lebanon, and Others Killed in Israeli Airstrike; North Korea Completely Seals Off Roads and Railways Connecting to South Korea; Xi Jinping: Make Every Effort to Ensure Fourth Quarter Economic Work; Market Expects China's Deposit Rates to be Lowered This Month; China Cyberspace Security Association Recommends Systematic Inspection of Intel Products for Cybersecurity Risks; PBOC and Ministry of Science and Technology Deploy Technology Financial Services in Key Regions.

Overnight, LME zinc opened at $3,051/mt, fluctuated around the daily moving average after the opening, quickly fluctuated upward to a high of $3,105/mt during midday, then fell below the daily moving average during the night session, hitting a low of $3,039.5/mt. LME zinc slightly rebounded at the end of the session, closing up at $3,062/mt, an increase of $10/mt or 0.33%. Trading volume decreased to 11,456 lots, and open interest decreased by 5,782 lots to 254,000 lots. Overnight, LME zinc recorded a bullish candlestick, with support from the lower Bollinger Band. LME zinc inventory increased by 1,225 mt to 240,525 mt, an increase of 0.51%. The US dollar index remained high, and ongoing geopolitical conflicts led to some market risk aversion sentiment. Coupled with market expectations for China's real estate sector, LME zinc's focus slightly rebounded.

Overnight, the most-traded SHFE zinc 2411 contract opened at 25,330 yuan/mt, initially reaching a high of 25,430 yuan/mt, then declined all the way, hitting a low of 24,990 yuan/mt near the end of the session, and finally closed down at 25,110 yuan/mt, a decrease of 190 yuan/mt or 0.75%. Trading volume decreased to 77,338 lots, and open interest decreased by 3,538 lots to 107,000 lots. Overnight, SHFE zinc recorded a bearish candlestick, with support from the 20-day moving average below. The fundamental supply weakness continued to provide support. Additionally, the State Council Information Office held a press conference on real estate today, and the market is waiting for more macro guidance, keeping SHFE zinc at high levels.

Tin

The SHFE tin prices opened lower and trended downwards during the night session, with most downstream enterprises adopting a wait-and-see attitude [SMM Tin Morning News Oct 17]

SMM, October 17: Yesterday, the closing price of the most-traded SHFE tin contract was 263,480 yuan/mt, down by 2,500 yuan/mt, a decrease of 0.94%. The highest price was 266,100 yuan/mt, and the lowest was 263,100 yuan/mt. During yesterday's morning session, the premiums and discounts for various domestic tin ingot brands quoted by trading companies did not change significantly compared to recent days. Among them, small brand tin ingots were quoted at premiums of +0~+200 yuan/mt against the SHFE 2411 contract, delivery brand prices were quoted at premiums of +200~+600 yuan/mt against the SHFE 2411 contract, Yunnan tin brand quotations against the SHFE 2411 contract were +600~+800 yuan/mt, and imported tin brand spot cargoes were quoted at -700 yuan/mt against the SHFE 2411 contract. During yesterday's morning session, tin prices hovered at high levels, with most downstream enterprises adopting a wait-and-see attitude, waiting to restock at lower prices. Some trading companies made scattered transactions, with a few trading companies transacting 20-30 mt. Overall, the spot market transactions cooled down yesterday.

Nickel

On October 16, Jinchuan nickel was quoted at a premium of 1,300-1,600 yuan/mt, with an average of 1,450 yuan/mt, up 100 yuan/mt from the previous trading day. Norilsk nickel was quoted at a discount of 400-150 yuan/mt, with an average of 275 yuan/mt, up 25 yuan/mt from the previous trading day. On the morning of October 16, the futures market fluctuated, and spot premiums narrowed compared to the previous working day. Nickel briquette prices were 132,370-132,800 yuan/mt (in short supply), down 1,215 yuan/mt from the previous trading day. The price spread between nickel briquette and nickel sulphate was about 4,405 yuan/mt (nickel sulphate prices were 4,405 yuan/mt lower than nickel briquette prices).