SMM Morning Comment For SHFE Base Metals (Dec 27)

SHANGHAI, Dec 27 (SMM) –

Copper

Year-End Downstream Demand Remains Weak, Transactions Sluggish [SMM Copper Morning Meeting Summary]
Futures Market: LME copper was closed overnight. The most-traded SHFE copper 2502 contract opened at 74,580 yuan/mt, initially hitting a high of 74,690 yuan/mt before fluctuating downward to an intraday low of 74,380 yuan/mt. It then fluctuated rangebound and consolidated at the end of the session, finally closing at 74,430 yuan/mt, up 0.36%. Trading volume reached 19,000 lots, and open interest stood at 143,000 lots.

Prices: Macro side, Thursday's data showed that the number of Americans filing new claims for unemployment benefits last week fell to the lowest level in a month, consistent with a cooling but still healthy US labour market. Additionally, post-Christmas holiday trading was sluggish, and the US dollar index edged down but remained at high levels, mainly due to market expectations that the US dollar will be supported by Trump administration policies next year, limiting copper price gains. Fundamentals side, the earlier opening of the import arbitrage window led to low-cost imported cargoes, resulting in ample copper cathode spot supply. However, year-end downstream demand remained weak, and overall transactions were sluggish. As of Thursday, December 26, SMM copper inventories in major regions nationwide increased by 6,000 mt from Monday to 105,400 mt, up 6,700 mt WoW, ending nine consecutive weeks of decline with a slight rebound. Compared to Monday's inventory changes, most regions nationwide saw increases, with only Guangdong and Jiangsu experiencing slight declines. Total inventory was 39,000 mt higher than the 66,400 mt YoY. In terms of prices, the macro outlook remains bearish, and fundamentals lack support, suggesting copper prices are expected to lack upward momentum today.

Aluminum

Domestic Aluminum Ingot Inventory Experiences Off-Season Destocking, Weak Supply and Demand Keep SHFE Aluminum Fluctuating Downward [SMM Aluminum Morning Meeting Summary]

Futures Market: Overnight, the most-traded SHFE aluminum 2502 contract opened at 19,800 yuan/mt, hit a high of 19,850 yuan/mt, a low of 19,725 yuan/mt, and closed at 19,730 yuan/mt, down 30 yuan/mt or 0.15% from the previous trading day. LME aluminum was closed for two days due to the holiday.

Summary: On the macro front, market expectations for the extent of US Fed interest rate cuts next year remain pessimistic, with the US dollar index hovering near its two-year high, putting pressure on base metals. On the fundamentals side, domestic aluminum supply pressure has eased recently, with a slight decline in operating capacity. Some aluminum smelters in Sichuan and Guangxi have reported capacity reductions due to technological transformation or losses. On the demand side, market demand continues to weaken during the off-season, with industries such as aluminum plate/sheet and strip and aluminum extrusion showing sluggish performance, and inventory buildup expectations remain strong. Overall, on the macro front, the pace of US Fed interest rate cuts remains unclear. On the fundamentals side, although supply pressure has slightly eased, weak demand during the off-season and the risk of inventory buildup continue to grow. In the short term, aluminum prices are expected to fluctuate downward.

Lead

Environmental Protection Impact Is Expected to Improve, SHFE Lead Falls to a One-Month Low [SMM Lead Morning News]

Yesterday, due to the Christmas holiday, multiple exchanges in the European and US markets were closed, and the LME remained shut. Additionally, the LME resumed normal trading today.

Overnight, the most-traded SHFE lead 2502 contract opened at 17,335 yuan/mt. Affected by environmental protection measures, trading showed signs of fatigue, and SHFE lead fluctuated downward, briefly dipping to 17,260 yuan/mt, marking a new low for nearly a month. In the latter half of the session, trading between bulls and bears appeared relatively stagnant, with SHFE lead consolidating around 17,300 yuan/mt for an extended period. It eventually closed at 17,275 yuan/mt, down 0.58%. Its open interest reached 55,385 lots, an increase of 641 lots compared to the previous trading day.

Zinc

Domestic Spot Zinc Remains Tight, Expected to Continue Supporting Zinc Prices [SMM Zinc Morning Comment]

Overnight, the number of initial jobless claims in the US last week was lower than expected; Netanyahu stated that Israel's strikes on the Houthi forces have just begun; Putin said Russia is ready to continue supplying natural gas to Europe via Poland; South Korea is considering a visa-free trial policy for Chinese group tourists; CATL plans to issue H-shares and list them on the Hong Kong Stock Exchange.

Overnight, LME zinc was closed for the Christmas holiday. The number of initial jobless claims in the US last week was below expectations, yet the US dollar index remained near a two-year high. LME zinc is expected to maintain a fluctuating trend.

Overnight, the most-traded SHFE zinc 2502 contract opened at 25,425 yuan/mt. At the beginning of the session, bulls increased their positions, pushing SHFE zinc to fluctuate upward above the daily moving average, reaching a high of 25,520 yuan/mt. Subsequently, bears increased their positions, causing SHFE zinc to fluctuate downward below the daily moving average, hitting a low of 25,375 yuan/mt. This was followed by intense competition between bulls and bears, with the center of SHFE zinc fluctuating around 25,420 yuan/mt. It eventually closed higher at 25,420 yuan/mt, up 25 yuan/mt or 0.10%. Trading volume decreased to 48,625 lots, while open interest increased by 1,820 lots to 152,000 lots. Overnight, SHFE zinc recorded a bearish candlestick, with the upper Bollinger Band forming resistance and various moving averages below providing support. Although imported zinc ingots are gradually flowing into the domestic market, the current spot market remains relatively tight, which is expected to provide some support for zinc prices.

Tin

After a slight rally in SHFE tin prices during the night session yesterday, they pulled back. The spot market reaction this week was relatively mediocre. [SMM Tin Morning Brief]

Yesterday, the SHFE tin market overall showed a fluctuating pullback trend. At the opening, market sentiment leaned cautious due to a stronger US dollar and slowing global economic growth. During trading, prices once reached an intraday high of 245,000 yuan/mt but later pulled back as profit-taking emerged. In the afternoon session, SHFE tin prices remained under pressure, hitting a low of 24.5 yuan/mt, marking a decline compared to the previous day. Market participants focused on changes in consumption demand and fluctuations in inventory levels. Although tin prices faced some short-term pressure, most downstream enterprises remained optimistic about long-term demand, believing that demand for NEVs and electronic products would gradually recover. Overall, the price fluctuations in SHFE tin yesterday reflected the market's cautious attitude toward the global economic outlook, with investors awaiting more macroeconomic data to assess future trends.