SMM Morning Comment For SHFE Base Metals October 26

SHANGHAI, October 26(SMM) –
Copper
Copper prices down overnight on rebounding US dollar index
LME copper prices opened at $8025/mt and closed at $7984.5/mt overnight, a decline of 1.15%, with the high-end of $8037.5/mt and the low-end of $7983/mt. Trading volume was 16,000 lots and open interest stood at 268,000 lots. The most active SHFE 2312 copper contract prices opened at 66800 yuan/mt and closed at 66590 yuan/mt last evening, a drop of 0.49%, with the high-end of 66800 yuan/mt and the low-end of 66570 yuan/mt. Trading volume was 26,000 lots, and open interest stood at 152,000 lots. On the macro front, U.S. Republican Congressman Mike Johnson was elected Speaker of the House of Representatives, and Capitol Hill has refocused on government spending. Domestically, the Ministry of Finance stated that the Chinese government's debt ratio is still within a reasonable range and the overall risk is controllable. In terms of fundamentals, East China was not affected by the rise in copper prices yesterday. Spot resources were still tight. Coupled with the market's expected limited inflow of imported copper, the premium and discount performance was relatively strong. Inventories in South China continued to decline, but due to higher copper prices, downstream buying interest was suppressed. Spot premiums and discounts fell yesterday. Prices will remain at low levels in the near term, supressed by the US dollar.
Aluminum
Overnight, the most-traded SHFE 2312 aluminum contract opened at 19055 yuan/mt, with its low and high at 18980 yuan/mt and 19065 yuan/mt before closing at 19010 yuan/mt, down 35 yuan/mt or 0.18%. LME aluminum opened at $2202/mt on Wednesday, with its low and high at $2199.5/mt and $2223/mt respectively before closing at $2212/mt, up 0.27%. There are many macro disturbing factors. The short-term Fed rate hike expectations swing and the Palestinian-Israeli conflict have intensified market uncertainty. Operating aluminum capacity in China is now 42.97 million mt, close to a peak, meaning no significant growth will be seen in short term. Downstream orders improved after the National Day holiday, but fell short of expectations. Aluminum ingot and billet pick-ups from social warehouses decreased last week. No inventory decline is expected any time soon. Aluminum prices are expected to move rangebound in the short term.
Lead
LME and SHFE lead prices both weakened as shorts increased positions
SHANGHAI, Oct 26 (SMM) -
LME lead open at $2104/mt and went downward during the Asian trading hours yesterday, declining to $2080/mt during the European trading hours. It finally dropped and closed at $2080/mt, down $20.5/mt or 0.98%.
The most active SHFE the delivery of the SHFE front-month contract 2312 lead contract prices opened at 16220 yuan/mt and touched 16275 yuan/mt before closing at 16240 yuan/mt, down 200 yuan/mt or 1.22%.
Zinc
SMM Zinc Morning Comments
Overnight, LME zinc prices opened at $2456/mt and closed up $20.5/mt or 0.83% at $2479/mt. The trading volume was 8008 lots, and open interest decreased 1260 lots to 202,000 lots. The speaker of the U.S. House of Representatives openly supports Israel, and the impact of the conflict in the Middle East is expanding. Overseas concerns about energy are growing, and short funds have withdrawn.
Last evening, the most active SHFE 2312 zinc contract prices opened at 21180 yuan/mt and closed at 21145 yuan/mt, up 85 yuan/mt or 0.4%. Trading volume stood at 45,000 lots, and open interest gained by 111 lots to 81,000 lots. The State Council's regular policy briefing stated that it will increase the issuance of treasury bonds to support post-disaster recovery and reconstruction and improve disaster prevention, reduction and relief capabilities. All the additional treasury bonds issued this time will be allocated to local governments through transfer payments. It is planned to use 500 billion yuan this year. 500 billion yuan will be carried forward to be used next year, and the issuance of incremental government bonds has boosted sentiment. The market's expectations for end-user consumption have improved.
Tin
SHFE 2312 tin contract rose to 216250 yuan/mt overnight and closed at 215400 yuan/mt, down 0.28%. Yesterday, spot premiums and discounts in domestic spot market for various domestic tin ingot brands changed little. Small brand tin ingots were offered at premiums of 0-400 yuan/mt, versus premiums of 400-700 yuan/mt for delivery brands, premiums of 1,000 yuan/mt for Yunxi brand, and discounts of 500 yuan/mt for imported brand tin ingots. Tin prices rose yesterday and downstream purchasing sentiment was weak.
Nickel
Overnight, the most-traded SHFE nickel contract opened at 146500 yuan/mt, and closed at 147900 yuan/mt, up 340 yuan/mt. Trading volume fell by 36248 lots, and open interest decreased by 7877 lots. On the macro side, the dovish speeches of Federal Reserve officials have been frequent. The expectation for the Federal Reserve to raise interest rates has continued to cool down. Market expects that the probability of an unchanged rate range in November and December rose to 89.6% and 70.5%. Demand in spot market declined yesterday. Nickel price is expected to rebound slightly.