SMM Morning Comment For SHFE Base Metals November 28

SHANGHAI, November 28(SMM) –
Copper
LME copper prices opened at $8388/mt and closed at $8375/mt in overnight trading, a drop of 0.77%, with the low-end of $8353.5/mt and the high-end of $8400/mt. Trading volume was 13,000 lots and open interest stood at 266,000 lots. The most active SHFE 2401 copper contract prices opened at 68010 yuan/mt and closed at 67830 yuan/mt last evening, down 0.26%, with the high-end of 68010 yuan/mt and the low-end of 67740 yuan/mt. Trading volumes stood at 27,000 lots and open interest stood at 160,000 lots. On the macro front, there were very few US data releases last night, and the market was waiting. European Central Bank President Christine Lagarde said overall inflation is likely to rise again in the coming months. On Fundamentals, as of Monday November 27, SMM copper inventories across major Chinese markets stood at 58,600 mt, up 1,600 mt from last Friday but still 55,400 lower than the same period last year. The decrease in the arrival of imported copper over the weekend in East China and some supplies being transferred to South China resulted in a decrease in inventory; in South China, due to the increase in shipments from surrounding refineries and the arrival of copper from the north, the supply of copper increased. However, production cuts occurred at downstream producers amid high premiums, resulting in an increase in overall inventories. In terms of consumption, high premiums still suppress downstream demand, and downstream consumers are expected to remain cautious. Copper prices are expected to remain rangebound as the market is cautious.
Aluminum
Overnight, the most-traded SHFE 2401 aluminum contract opened at 18880 yuan/mt, with the highest and lowest prices at 18895 yuan/mt and 18810 yuan/mt before closing at 18825 yuan/mt, down 20 yuan/mt or 0.11%. LME aluminum opened at $2221.5/mt in the previous trading day, with its low and high at $2209/mt and $2235/mt respectively before closing at $2211.5/mt, down 0.65%.
On the macro level, geopolitical risks in the Middle East have eased, while expectations for further interest rate hikes by the Federal Reserve have cooled. The U.S. dollar index continued to fall on Monday, providing some support for aluminum prices. Domestic favorable policies are frequently released, boosting market confidence, and driving aluminum consumption to grow towards the end of the year. In terms of fundamentals, aluminum ingot inventory has basically entered a downward trend. Due to aluminum production cuts in Yunnan, domestic operating production capacity has dropped to around 41.8 million mt, easing supply-side pressure. However, due to recent exchange rate fluctuations, the import window has shown signs of opening. The inflow of imported goods will add to domestic supply. The performance of downstream operating rates is weak in the off-season. SMM believes that the rebound in aluminum prices on Monday was mainly driven by sharp inventory reduction. However, the ongoing off-season means that any upward potential will be limited for short-term aluminum prices, which may mainly fluctuate around 19,000 yuan/mt.
Lead
Overnight, LME lead opened at $2,195/mt. Dragged down by the decline in SHFE lead and the LME lead inventory accumulation, LME lead prices inched lower throughout the day, falling to as low as $2,161/mt. At last, the contract closed at $2162/mt, down 1.5%.
The most traded SHFE 2401 lead contract opened at 16105 yuan/mt overnight and recorded a one-and-a-half-month low of 16095 yuan/mt. SHFE lead finally closed at 16140 yuan/mt, down 0.95%. The open interest was up 2268 lots to 74480 lots.Zinc
Overnight, LME zinc opened at $2555.5/mt and closed down $32.5/mt or 1.27% at $2527.5/mt. The trading volume was 6581 lots, and open interest lost 614 lots to 203,000 lots. Although it is difficult for LME zinc to rise against the background of large-scale overseas positions; however, macro data reflects a recession. The downside space for LME zinc is narrow due to the weakening of the US dollar.
Overnight, the most-traded SHFE 2401 zinc contract opened at 21210 yuan/mt and closed at 21150 yuan/mt, up 35 yuan/mt or 0.17%. Trading volume stood at 45,000 lots, and open interest gained by 1271 lots to 85,000 lots. Recently, the SHFE/LME price ratio has been gradually declining, the overseas ore import window has tended to close. Smelters have tended to buy domestic ore, and domestic TCs have continued to fall. The reduction in TCs has given zinc prices a certain cost-end support, and it is difficult for zinc futures to rise sharply.
Tin
SHFE 2312 tin contract fell to 196910 yuan/mt overnight and closed at 192960 yuan/mt, down 3.58%.
Yesterday, spot premiums and discounts in domestic spot market for various tin ingot brands were as below. Small brand tin ingots were offered at discounts of 300-500 yuan/mt over SHFE 2312 tin contract, versus premiums of 500-900 yuan/mt for delivery brands, premiums of 900-1100 yuan/mt for Yunxi brand, and discounts of 0-800 yuan/mt imported brand tin ingots. Tin prices continued to fall yesterday, and transactions in the spot market were relatively thin. Downstream companies, mostly having stocked up enough raw materials earlier, barely showed any purchasing interest.
Nickel
Overnight, the most-traded SHFE nickel contract opened at 127500 yuan/mt, and closed at 122780 yuan/mt, down 6370 yuan/mt. Trading volume rose 220,000 lots, and open interest increased by 79754 lots. The current nickel price is not very sensitive to macro sentiment, and is mainly subject to fundamentals of refined nickel instead. The current pure nickel oversupply persists. Supply continues to increase, and there is no plan to reduce production for the time being. Although downstream demand has improved during the week, overall demand is still weak. Nickel price is expected to move rangebound and then decline.