SMM Morning Comment For SHFE Base Metals October 30

Copper

Copper prices went up as US core PCE hit new low
LME copper prices opened at $8035/mt and closed at $8091/mt in last Friday evening trading, a gain of 1.29%, with the low-end of $8028/mt and the high-end of $8122.5/mt. Trading volume was 20,000 lots, and open interest stood at 270,000 lots. The most active SHFE 2312 copper contract prices opened at 67120 yuan/mt and finished at 67210 yuan/mt last Friday evening, up 0.89%, with the low-end of 67100 yuan/mt and the high-end of 67120 yuan/mt. Trading volume was 40,000 lots, and open interest stood at 156,000 lots. On the macro front, the U.S. core PCE price index recorded an annual rate of 3.7% in September, a new low since May 2021. The PCE indicator strengthens the case for the Fed to stay on hold. SMM data showed that as of Friday October 27, copper inventory across major Chinese markets stood at 68,000 mt, down 16,300 mt from last Monday and down 27,300 mt from two Fridays ago. Inventories hit the lowest for the year. In East China, due to the large number of domestically produced copper being directly shipped to downstream buyers and limited inflow of imported copper, inventories have declined significantly; inventories in South China have declined slightly, as the shipments of some goods from north China to Guangdong offset part of the increase in downstream demand. In terms of consumption, downstream companies still have sufficient orders, and demand is expected to still perform well. Copper prices are expected to remain relatively low in the near term.

Aluminum

At last Friday’ night session, the most-traded SHFE 2312 aluminum contract opened at 18925 yuan/mt, with its low and high at 18925 yuan/mt and 19145 yuan/mt before closing at 19140 yuan/mt, up 235 yuan/mt or 1.24%. LME aluminum opened at $2200/mt last Friday, with its low and high at $2187/mt and $2230.5/mt respectively before closing at $2225.5/mt, up $29/mt or 1.32%. In summary, overseas macroeconomic uncertainty persists. US economic data shows resilience, but the high fluctuation of the dollar index is putting pressure on commodities. Domestically, the additional one trillion yuan of sovereign bonds indicates robust policy measures. Some aluminium billet producers have cut output, casting ingot volume has increased, and potential Yunnan production cuts remain unconfirmed. Short-term domestic aluminium supply is high, with minor profits from imported aluminium ingot spot transactions, and imported goods volume remains stable. As downstream consumption transitions between peak and off-peak periods, aluminium ingot inventory reduction is slow, keeping inventory at a six-month high. Short-term aluminium prices are likely to fluctuate, with the most-traded SHFE contract expected to trade between 18,600 and 19,400 yuan/mt, and LME aluminium likely between $2,140 and 2,300 /mt in the week ending November 3.

Lead

SMM lead morning comment
SHANGHAI, Oct 30 (SMM) -
LME lead opened at $2097.5/mt last Friday evening and rose by 0.41% to close at $2103/mt, with the lowest point at $2092.5/mt and the highest point of $2125/mt.

The most traded SHFE 2312 lead contract prices opened at 16295 yuan/mt and rose by 0.59% to close at 16300 yuan/mt last Friday evening, after hitting the highest point of 16340 yuan/mt and the lowest point of 16280 yuan/mt.

Zinc

SMM Zinc Morning Comments
Last Friday, LME zinc opened at $2,436.5/mt and finally closed up at $2466/mt, up $36/mt, or 1.48%. The trading volume decreased by 1500 lots to 7139 lots, and the open interest decreased by 387 lots to 201,000 lots. LME inventory fell by 1,850 mt to 76,525 mt, a decrease of 2.36%. The annual rate of the US core PCE price index in September was recorded at 3.7%, the lowest since May 2021. The new low strengthened the market's belief that the Federal Reserve will suspend interest rate hikes.
The most active SHFE 2312 zinc contract prices opened at 21145 yuan/mt and gained 300 yuan/mt or 1.43% to settle at 21270 yuan/mt. Trading volumes were 72303 lots and open interest grew 5576 lots to 85372 lots. Zinc inventories in the seven major markets of China fell 5,700 mt to 96,900 mt, supporting zinc prices.
Tin

SHFE 2312 tin contract price dropped to 213520 yuan/mt at last Friday’s night session and then gradually stabilized. During the early trading last Friday, spot premiums and discounts in domestic spot market for various domestic tin ingot brands changed only slightly. Small brand tin ingots were offered of 200-500 yuan/mt, versus premiums of 300-700 yuan/mt for delivery brands, premiums of 900-1,000 yuan/mt for Yunxi brand, and discounts of 500-600 yuan/mt for imported brand tin ingots. The tin price continued to fall last Friday, and the purchasing sentiment of downstream companies improved slightly. Overall, the spot market transactions picked up.

Nickel

On the macro aspect, even though the Fed hasn't halted its current interest rate hike process, geopolitical concerns and recent dovish comments from Fed officials have caused a decrease in the market's expectations for further Fed rate hikes. Traders put the chance of interest rates remaining unchanged in November and December at 89.6% and 70.5%, respectively. This relieved some of the macro pressure on SHFE nickel. Looking at the fundamentals, recent trading in the spot market was sluggish. When looking at downstream demand by industry, the demand in the alloy sector remained relatively stable, supported by military orders. In the stainless steel sector, the reduced production of 300-series stainless steel is expected to continue until November, leading to a decline in the recent demand for raw materials like pure nickel. The fall in demand is also one of the main reasons for the recent accumulation of pure nickel inventory. With the ongoing increase in domestic electrowinning nickel production, SMM anticipated that refined nickel production in October will be around 22,800 mt, marking an increase of about 3.2% compared to September. The current increase in domestic nickel plate production cannot be fully absorbed by domestic demand. This has resulted in some nickel plates becoming warehouse receipts or accumulating as social inventory. Furthermore, some nickel plates were exported, explaining the continued accumulation of warehouse receipts and social inventory since September and the significant increase in export volume in the last two months. In summary, the fundamental situation for pure nickel currently remains weak, but the bearish sentiment on the macro level has slightly eased.