SMM Morning Comment For SHFE Base Metals December 25

SHANGHAI, December 25 (SMM) –
Copper
LME copper prices opened at $8600.5/mt and closed at $8570/mt in last Friday evening trading, a decline of 0.42%, with the low-end of $8564.5/mt and the high-end of $8636/mt. Trading volume was 14,000 lots, and open interest stood at 281,000 lots. The most active SHFE 2401 copper contract prices opened at 68960 yuan/mt and finished at 69080 yuan/mt overnight, up 0.04%, with the low-end of 68910 yuan/mt and the high-end of 69230 yuan/mt. Trading volume was 24,000 lots and open interest stood at 154,000 lots. On the macro front, the annual inflation rate in the United States fell further in November, and the PCE increase in November was also lower than that in October, strengthening the market's expectations for a U.S. interest rate cut in March next year. The center of gravity of the U.S. index has shifted downward, which is bullish for copper prices. In terms of fundamentals, according to SMM research, as of last Friday, December 22, copper inventories in mainstream regions across China fell by 6,700 tons to 56,600 tons from last Monday. This was mainly due to the lack of domestic copper and imported copper arrivals. There were many direct shipments from refineries to downstream buyers, which has led to a decline in inventories in most areas. From the supply side, as imported copper will continue to flow into the market this week, and refineries will clear inventories at the end of the year, there will be an increase in market supply this week. In terms of consumption, there is demand for funds from the downstream in the last week of the year-end. Combined with the impact of high copper prices, demand is expected to be under pressure. Copper price gains are unlikely to sustain.
Aluminum
Last Friday’s night session, the most-traded SHFE 2401 aluminum contract opened at19215yuan/mt, with the highest and lowest prices at19395 yuan/mt and 19190 yuan/mt before closing at 19375yuan/mt, up 265 yuan/mt or 1.39%. LME aluminum opened at $2246/mt last Friay, with its low and high at $2246/mt and $2332/mt respectively before closing at $2324/mt, up 3.5%.
Domestically, positive economic signs emerge as the central bank promotes counter-cyclical adjustments and reasonable credit growth. The National Development and Reform Commission plans new reserve strategies. Internationally, stability remains despite the Red Sea crisis adding uncertainty. Aluminum supply is stable in China, but northern winter weather pressures transport, requiring focus on domestic aluminium deliveries. Demand may drop as the off-season nears and year-end fund withdrawals by businesses reduce restocking interest, likely slowing the decrease in aluminium inventories, which should remain low, supporting prices.
Lead
LME lead open at $2067.5/mt last Friday and reached a high of $2083/mt and a low of $2058/mt during the European trading hours. It finally dropped and closed at $2071/mt, up $8/mt or 0.39%. In addition, LME market trading is closed today due to the Christmas holiday and will resume trading on Wednesday (December 27).
The most-traded SHFE 2402 lead contract opened at 15710 yuan/mt and rose 85 yuan/mt or 0.54% to close at 15720 yuan/mt last Friday evening, briefly hitting the lowest point at 15630 yuan/mt and the highest point at 15775 yuan/mt. The open interest decreased by 2837 lots from the previous trading day to 52706 lots.
Zinc
Last Friday, LME zinc opened at $2553/mt and closed up $49.5/mt or 1.94% at $2602.5/mt. The trading volume was 8688 lots, and open interest added 1667 lots to 195,000 lots. Last week, a large amount of more than 20,000 tons of zinc was delivered to the LME, with total inventories exceeding 230,000 tons, hitting the highest level since September 2021, thus suppressing market optimism. But the annual rate of the U.S. core PCE price index in November was lower than expected. 3.2%. The market has predicted the progress of interest rate cuts in advance, and the bullish sentiment is fermenting. Today is the Christmas holiday and LME zinc trading is suspended.
Last Friday evening, the most active SHFE 2402 zinc contract prices opened at 21330 yuan/mt and closed at 21350 yuan/mt, up 115 yuan/mt or 0.54%. Trading volume stood at 47,000 lots, and open interest decreased by 860 lots to 83,000 lots. The environmental protection warning in the north has been revived. At the same time, heavy snowfall in Shandong has weakened the production of galvanizing companies. The off-season consumption has limited the upward movement of zinc prices. The upward pressure on zinc prices has come under pressure. However, the external market drove the internal market higher last Friday.
Tin
SHFE 2401 tin contract closed at207440 yuan/mt last Friday’s night session, down 1.02%.
Last Friday, 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 0-300 yuan/mt over SHFE 2401 tin contract, versus premiums of 400-800 yuan/mt for delivery brands, premiums of 900-1100 yuan/mt for Yunxi brand, and discounts of 600-1000 yuan/mt imported brand tin ingots. Tin prices spiked, dampening downstream buying appetite.
Nickel
Nickel prices fluctuated, closing slightly lower at 130,740 yuan/mt on last Friday. Nickel prices remained range-bound observed in the week ending December 15. Among other nickel products, nickel sulphate prices remained unchanged last week due to reduced inventory and weak downstream demand. While nickel salt prices stabilized, nickel prices saw a slight decrease last week, narrowing the price gap between the two once again. If this trend of narrowing continues, it might affect the production of electrowinning nickel from some externally sourced raw materials in the future. In a macro perspective, the recent outbreak of conflicts in the Red Sea region led several international shipping companies to announce the temporary suspension of routes through the Red Sea. The latest data indicates that, as of December 21, goods worth $105 billion (approximately ¥750 billion) have been diverted from this route. The Suez Canal to the Red Sea, a crucial international shipping passage connecting the Red Sea to the Mediterranean and controlling the transportation routes between Asia, Africa, and Europe, is one of the busiest waterways globally. The global nickel supply is mostly concentrated in Asia, with only a few products requiring transportation from Europe. Therefore, overall, the current Red Sea conflict has a relatively minor impact on nickel prices. From a fundamental perspective, refined nickel inventories both domestically and internationally increased last week. LME inventories rose by 6,882 mt compared to the previous week, while domestic SMM social inventories increased by 1,344 mt. Additionally, nickel prices rebounded compared to last month. Due to the ongoing decline in raw material prices, the profit margins for nickel plate production from externally sourced raw materials are increasing. As a result, factories reducing or halting production partially are now back in operation, leading to an increase in output. From the demand perspective, there was a slight increase in orders for electroplating and alloys last week. This is reflected in the active trading for Jinchuan nickel plates in the spot market last week. Regarding stainless steel, some major factories resumed production of the 300 series during December, and some enterprises increased their production schedules. In summary, current supply and demand are both on the rise, but the supply is increasing faster than demand, leading to a continuing trend of accumulating inventories domestically.