SMM Morning Comment For SHFE Base Metals December 12

SHANGHAI, December 12 (SMM) –
Copper
LME copper prices opened at $8363/mt and closed at $8343/mt in overnight trading, a drop of 1.13%, with the low-end of $8327/mt and the high-end of $8377.5/mt. Trading volume was 17,000 lots and open interest stood at 288,000 lots. The most active SHFE 2401 copper contract prices opened at 67990 yuan/mt and finished at 67930 yuan/mt overnight, down 0.72%, with the low-end of 67800 yuan/mt and the high-end of 68080 yuan/mt. Trading volume was 27,000 lots and open interest stood at 148,000 lots. On the macro front, data from the New York Federal Reserve showed that the median expectation of U.S. consumers for the inflation rate in the next year fell for the second consecutive month in November, from 3.6% in October to 3.4%, the lowest level since April 2021. The market will remain cautious as the market awaits the upcoming US CPI data. On Fundamentals, as of Monday December 11, SMM copper inventories across major Chinese markets stood at 64,700 mt, up 7,100 mt from last Friday and 43,200 mt lower than the same period last year. Due to the increase in weekend arrivals in East China and poor consumer demand amid a big price spread between front-month and next-month contracts, inventory increased; in South China, both imported copper and domestic copper have arrived in large quantities, and the demand was weak, growing the inventory significantly. In terms of consumption, as delivery is approaching and the price spread between front-month and next-month contracts is high, the overall demand is expected to be weak. There will be limited upside room for copper prices as the US dollar weighed.
Aluminum
Overnight, the most-traded SHFE 2401 aluminum contract opened at 18360 yuan/mt, with high and low at 18405 yuan/mt and 18340 yuan/mt before closing at 18365 yuan/mt, down 15 yuan/mt or 0.08%. LME aluminum opened at $2139/mt yesterday, with its high and low at $2141/mt and $2116/mt respectively before closing at $2124/mt, down 0.47%.
On the macro front, the market is beginning to bet on the Federal Reserve to cut interest rates next year. There are growing expectations for the release of favorable policies in China at the end of the year, but it will still take time to transmit to the manufacturing industry and other sectors. In terms of fundamentals, there are no further changes expected on the supply side in the short term, and market trading logic generally focuses on the resilience of consumer demand in the off-season. Aluminum prices may be relatively weak, but should find support from falling stocks.
Lead
LME lead open at $2025/mt overnight and stabilised during the Asian trading hours. It fell to $2021/mt during the European trading hours, and finally rose and closed at $2053.5/mt, up 1.51%.
The most active SHFE 2401 lead contract prices opened at 15545 yuan/mt last evening, and closed at 15645 yuan/mt, an increase of 0.32%, with the high-end of 15650 yuan/mt and the low-end of 15510 yuan/mt.
Zinc
Overnight, LME zinc opened at $2392/mt, hitting a low and high of $2376/mt and $2421/mt respectively, and closed at $2417/mt, up $27.5/mt or 1.15%. Trading volume decreased to 9134 lots, and open interest grew 2162 lots to 202,000 lots. LME zinc inventory decreased by 450 mt or 0.21% to 215000 mt. Data from the New York Fed showed that U.S. consumers' median expectations for inflation over the next year fell for the second consecutive month in November, falling to 3.4% from 3.6% in October, the lowest level since April 2021, strengthening expectations of an end to rate hike by the Federal Reserve.
The most-traded SHFE 2401 zinc contract opened at 20600 yuan/mt overnight and fell to 20510 yuan/mt before rallying to a peak of 20780 yuan/mt. It eventually settled at 20735 yuan/mt, up 130 yuan/mt or 0.63%. Trading volume reduced to 33862 lots, and open interest gained by 75 lots to 83688 lots. According to SMM research, refined zinc production in November recorded 579,000 tons, lower than previously expected. With the supply slightly lower than expected, the fundamentals have supported zinc prices. But supply has been ample, and there is not much room for SHFE zinc to rise.
Tin
SHFE 2401 tin contract fell to 205000 yuan/mt overnight and closed at 205070 yuan/mt, down 0.80%. Yesterday, spot premiums and discounts in domestic spot market for various tin ingot brands were as below. Small brand tin ingots were offered at premiums of 0-400 yuan/mt over SHFE 2401 tin contract, versus premiums of 400-800 yuan/mt for delivery brands, premiums of 800-1100 yuan/mt for Yunxi brand, and discounts of 200-700 yuan/mt imported brand tin ingots. Tin prices continued to fluctuate downward yesterday. Traders reported that downstream companies' purchasing sentiment was not high. Imported tin ingots were more popular in the market.
Nickel
Overnight, the most-traded SHFE nickel contract opened at 133530 yuan/mt, and closed at 132060 yuan/mt, down 1760 yuan/mt. Trading volume fell by 129,000 lots, and open interest decreased by 8279 lots. At present, we still need to pay attention to the annual non-seasonally adjusted CPI rate in the United States in November, which will be announced on the evening of December 12. The previous value was recorded at 3.2%. Market expectations predict that the value will continue to cool down. The data will affect the Federal Reserve’s interest rate decision in December. From a fundamental perspective, the supply of pure nickel has declined slightly, but downstream demand for pure nickel is limited. Nickel price is expected to move rangebound, with little upward momentum.