SMM Morning Comment For SHFE Base Metals On January 10

SHANGHAI, January 10 (SMM) –

Copper

Overnight, LME copper opened at $9,084.5/mt, initially declined to a low of $9,056.5/mt, fluctuated widely during the session, and fluctuated upward towards the close, reaching a high of $9,114/mt before settling at $9,111.5/mt, up 0.67%. Trading volume reached 18,000 lots, and open interest stood at 261,000 lots. Overnight, the most-traded SHFE copper 2502 contract opened at 75,020 yuan/mt, hit a high of 75,250 yuan/mt at the start, then declined to a low of 74,990 yuan/mt, fluctuated rangebound thereafter, and finally closed at 75,120 yuan/mt, up 0.58%. Trading volume reached 19,000 lots, and open interest stood at 140,000 lots. Macro side, colder weather in parts of the US and Europe boosted winter fuel demand, leading to strong global crude oil demand, which supported copper prices. Additionally, several US Fed officials confirmed on Thursday that the Fed might keep interest rates at current levels for an extended period, with further interest rate cuts only likely if inflation cools significantly. Focus today is on the non-farm payrolls data, as the December report is expected to provide clearer insights into the current dynamics of the US labour market. Fundamentally, market liquidity remains tight, with suppliers showing a clear tendency to hold back cargoes. As of Thursday, January 9, SMM data showed that copper inventories in major regions across China decreased by 10,100 mt from Monday to 105,700 mt, ending a two-week increase and resuming a decline. Compared to Monday, inventories in most regions nationwide saw reductions. Looking ahead to next week, total supply is expected to increase. However, with the Chinese New Year holiday approaching, downstream consumption may decline, and weekly inventories may rise again. In terms of prices, copper prices are expected to face limited upward space today, with more attention on the US non-farm payrolls data.

Aluminum

Futures Market: The most-traded SHFE aluminum 2502 contract opened at 19,960 yuan/mt overnight, hitting a high of 20,055 yuan/mt and a low of 19,930 yuan/mt, before closing at 20,015 yuan/mt, up 70 yuan/mt or 0.35%. Yesterday, LME aluminum opened at $2,505/mt, reached a high of $2,548/mt and a low of $2,502/mt, and closed at $2,548/mt, up $40/mt or 1.59%.

Summary: On the macro side, mixed factors are at play. The Chinese government continues to boost consumption, while uncertainty over the pace of US Fed interest rate cuts increases. Fundamentals side, primary aluminum capacity remained stable in early January, while alumina fundamentals showed a slight surplus. Spot alumina prices may continue their downward trend in the short term, and the cost side of the primary aluminum industry may keep declining. On the demand side, market demand weakened further during the off-season, with aluminum processing operating rates declining steadily. Some aluminum processing plants are nearing holiday closures. Although pre-holiday stocking led to unexpected inventory destocking, temporarily supporting aluminum prices, the sustainability of this trend is expected to be limited. Key areas to watch include the impact of falling spot alumina prices on the cost side of primary aluminum, as well as downstream holiday schedules and the continuation of pre-holiday stocking activities.

Lead

Overnight, LME lead opened at $1,934/mt, fluctuated upward during the Asian session, peaked at $1,949/mt in the European session before plunging, and rebounded slightly after hitting a low of $1,917/mt, finally closing at $1,936.5/mt, up 0.31%.

Overnight, the most-traded SHFE lead 2502 contract opened lower with a gap at 16,440 yuan/mt, briefly touched a high of 16,470 yuan/mt at the beginning of the session before fluctuating downward, hitting a low of 16,305 yuan/mt, and slightly rebounded at the end to close at 16,380 yuan/mt, down 1.15%.

Next week marks the delivery date for the SHFE lead 2501 contract, which may lead to the transfer of delivery cargoes to warehouses. Meanwhile, the impact of the Chinese New Year on the market will intensify. On one hand, downstream enterprises that started their holidays earlier will begin next week; on the other hand, long-distance logistics transportation vehicles will gradually decrease, disrupting spot market transactions. Additionally, suppliers generally plan to clear inventory before the holiday, resulting in limited expectations for inventory buildup of delivered lead ingots during this round. Overall, lead prices are likely to fluctuate downward.

Zinc

Overnight, LME zinc opened at $2,826/mt. After the opening, LME zinc fluctuated around the daily moving average, briefly dipping to $2,818.5/mt before quickly rising to a high of $2,876/mt. It then fell back from highs to near the daily moving average, slightly rebounding towards the end of the session, and finally closed up at $2,860/mt, an increase of $37.5/mt or 1.33%. Trading volume decreased to 12,648 lots, while open interest increased by 366 lots to 217,000 lots. Overnight, LME zinc formed a bullish candlestick, with resistance from the 5-day moving average above. LME zinc inventory decreased by 3,625 mt to 216,900 mt, a drop of 1.64%. Market concerns over US tariff policies persisted, and the US dollar index fluctuated at highs, continuing to exert pressure on zinc prices. LME zinc operated at low levels.

Overnight, the most-traded SHFE zinc 2502 contract opened at 24,185 yuan/mt. At the beginning of the session, SHFE zinc reached a high of 24,235 yuan/mt before trending downward to a low of 24,040 yuan/mt. It then fluctuated around 24,100 yuan/mt and finally closed down at 24,100 yuan/mt, a decrease of 10 yuan/mt or 0.04%. Trading volume fell to 53,502 lots, while open interest increased by 74 lots to 101,000 lots. Overnight, SHFE zinc formed a bearish candlestick, with support from the lower Bollinger Band. Recently, downstream sectors have continued to stock up raw materials at lower prices, and SMM zinc ingot inventory continued to decline MoM, providing some support for zinc prices. The center of SHFE zinc prices moved slightly upward.

Tin

During yesterday's night session, SHFE tin pulled back slightly, retreating to 250,000 yuan/mt. Overall, spot market prices fluctuated widely, following SHFE tin prices. Premiums and discounts for various brands warmed up slightly. Spot market transactions remained mediocre yesterday, with most traders engaging in scattered deals, while a few traders completed transactions for 1-2 truckloads. Most traders are not considering restocking before the holiday and plan to enter the holiday period once their current inventory is cleared. Downstream enterprises are mostly adopting a wait-and-see approach and are not enthusiastic about this week's prices. They plan to conduct partial restocking next week, awaiting a better restocking opportunity, which may lead to a final small procurement peak before the holiday.

Nickel

Spot Premiums/Discounts: Mainstream spot premiums for Jinchuan No. 1 nickel were quoted in the range of 3,000-3,300 yuan/mt, with an average premium of 3,150 yuan/mt, down by 300 yuan. Russian nickel premiums/discounts were quoted in the range of -200 to 100 yuan/mt, with an average of -50 yuan/mt, flat YoY.

Futures Market: In the morning, nickel prices rose by 600 yuan to 125,170 yuan, an increase of 0.48%.

Today's futures market continued to rise, but with sluggish market transactions, Jinchuan brand nickel premiums continued to pull back, with the average premium falling to 3,150 yuan/mt. Demand side, overall market transactions have been sluggish recently. Supply side, overall production supply remains sufficient. With a loose supply-demand balance, nickel prices are expected to fluctuate downward in the short term.

Nickel Sulphate Price Spread: Nickel briquette prices were 124,600-124,900 yuan/mt, up by 100 yuan/mt compared to the previous trading day's spot price. Nickel sulphate remains at a discount to refined nickel.