SMM Morning Comment For SHFE Base Metals January 18

SHANGHAI, January 18 (SMM) –
Copper
U.S. retail sales data exceeds expectations, copper prices fall overnight
LME copper prices opened at $8326.5/mt and closed at $8283.5/mt in overnight trading, a drop of 0.74%, with the low-end of $8260.5/mt and the high-end of $8343.5/mt. Trading volume was 25,000 lots, and open interest stood at 276,000 lots. The most active SHFE 2403 copper contract prices opened at 67820 yuan/mt and closed at 67620 yuan/mt last evening, down 0.46%, with the high-end of 68160 yuan/mt and the low-end of 67590 yuan/mt. Trading volumes stood at 20,000 lots and open interest stood at 149,000 lots. On the macro front, U.S. retail sales data in December exceeded expectations by 0.6%. Swap contracts showed that the probability of the Federal Reserve cutting interest rates in March dropped to about 50%. The market began to accept the prospect of delaying interest rate cuts. The U.S. index rose, weighed on copper prices. In terms of fundamentals, from the supply side, imported copper has gradually flowed into the domestic trade market in East China in the past two days, and warehouse receipts have also been released. The spot market has relatively abundant supply of goods. In terms of consumption, the copper prices continue to decline, and downstream processing companies are still afraid of price falling. Only some small factories are still enthusiastic about purchasing. If copper prices can remain stable, demand is expected to increase. In terms of price, it is expected that copper prices will continue to be under pressure from the US dollar.
Aluminum
Overnight, the most-traded SHFE 2403 aluminium contract opened at 18,810 yuan/mt, with high and low at 18,815 yuan/t and 18,730 yuan/mt before closing at 18,760 yuan/mt, down 110 yuan/mt or 0.58%. LME aluminum opened at $2,215/mt on Wednesday, with high and low at $2,217/mt and $2,175/mt respectively before closing at $2,176/mt, a drop of $24/mt or 1.09%.
On the macro front, the US data on Wednesday exceeded expectations, which once again cooled down market expectations for interest rate cuts, and the US dollar index continued to rise; the resurgence of the Red Sea incident is pushing up global shipping prices. In terms of fundamentals, the disturbance in the alumina supply still existed, domestic aluminium smelters maintained stable operation, the amount of aluminium ingot produced was expected to increase MoM in January, and imported aluminium ingots may increase. In addition, the aluminium market may enter a traditional inventory accumulation amid low-season, but domestic aluminium ingot inventories continued to remain low. The shipment increased thanks to pre-holiday stockpiling, thus the total inventory may be difficult to exceed level in the same period of 2023. While the support for aluminium prices from fundamentals has weakened, high alumina prices have offered solid cost support. SMM predicts that most-traded SHFE aluminium are likely to drift sideways, and we need to pay close attention to the pace of the Federal Reserve's interest rate cuts, domestic consumption and inventory changes.
Lead
Nonferrous metals generally fell overnight, LME lead prices dropped [SMM Lead Morning Comment]
LME lead opened at $2097/mt and went downward during the Asian trading hours yesterday, declining to $2054/mt during the European trading hours. It finally dropped and closed at $2057/mt, down $37/mt or 1.77%.
The most active SHFE 2403 lead contract prices opened at 16170 yuan/mt and touched 16245 yuan/mt before closing at 16220 yuan/mt, up 5 yuan/mt or 0.03%.
Zinc
Weak real estate data hurts market confidence, SHFE zinc prices declined [SMM zinc morning comment]
LME zinc prices opened at $2548/mt last evening and closed down $86.5/mt or 3.39% at $2466.5/mt. Trading volume increased to 11397 lots, and open interest decreased by 1323 lots to 208,000 lots. LME zinc inventory dropped by 1600 mt or 0.77% to 205700 mt. U.S. retail sales data in December exceeded expectations by 0.6%. The swap contract showed that the probability of the Federal Reserve cutting interest rates in March dropped to about 50%, further weakening market expectations for the Federal Reserve's interest rate cut in March. Macroeconomic pressure was positive, and the U.S. dollar index gained momentum.
The most active SHFE 2403 zinc opened at 21045 yuan/mt and fell 330 yuan/mt or 1.56% to close at 20870 yuan/mt trading with the high-end of 21045 yuan/mt and the low-end of 20850 yuan/mt. Trading volumes decreased to 61348 lots and open interest grew 6165 lots to 89136 lots. China's real estate development investment fell by 9.6% year-on-year in 2023, and the sales area of commercial housing nationwide fell by 8.5%. The weak real estate data dampened market sentiment, coupled with the external bearish sentiment, and the demand in the off-season was relatively light.
Tin
SHFE 2402 tin contract stayed high overnight and closed at 213650 yuan/mt, up 0.19%.
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 0-500 yuan/mt and premiums of 0-100 yuan/mt over SHFE 2402 tin contract, versus premiums of 0-600 yuan/mt for delivery brands, premiums of 600-1000 yuan/mt for Yunxi brand, and discounts of 1000-1100 yuan/mt for imported brand tin ingots. Tin prices remained high and traded sideways in early trading yesterday. Trading companies reported that there were only a few customers making inquiries and placing orders yesterday. Most downstream companies took a wait-and-see attitude in the face of high tin prices.
Nickel
Overnight, the most-traded SHFE nickel contract opened at 127300 yuan/mt, and closed at 127030 yuan/mt, up 180 yuan/mt. Trading volume rose 8283 lots, and open interest decreased by 2624 lots. From a macro perspective, judging from the CPI data released by the Federal Reserve on the evening of January 11, the current core CPI has declined, which is good for commodities. Yesterday, LME nickel inventory destocked slightly by 96 mt, with the destocking mainly coming from Asia. Nickel price is expected to move rangebound.