SMM Morning Comment For SHFE Base Metals January 26

SHANGHAI, January 26 (SMM) –
Copper
LME copper prices opened at $8557.5/mt and closed at $8547.5/mt in narrow range, a drop of 0.23%, with the low-end of $8529/mt and the high-end of $8599/mt. The trading volume was 22,000 lots, and open interest stood at 279,000 lots. The most active SHFE 2403 copper contract prices opened at 69050 yuan/mt and finished at 69120 yuan/mt overnight, with the high-end of 69130 yuan/mt and the low-end of 68920 yuan/mt, up 0.36%. Trading volume was 27,000 lots, and open interest stood at 152,000 lots. On the macro front, U.S. GDP in the fourth quarter exceeded expectations by 3.3%, and the number of initial jobless claims in the week of January 20 hit a two-month high. The market increased its bets on the Federal Reserve to cut interest rates. At the same time, crude oil rose due to geopolitical influences, boosting copper price. In terms of fundamentals, copper prices unexpectedly surged higher. Although the premium was lowered, downstream stocking enthusiasm was suppressed by fear of high prices and consumption was lukewarm. If copper prices remain high, consumption recovery is expected to be low. The weakening of overall consumption coupled with the continued impact of low-priced imported copper means supply is expected to remain relatively loose. Taken together, the impact of the People's Bank of China's RRR cut continues, and the market has increased expectations for the Federal Reserve's interest rate cut coupled with geopolitical influences. Copper prices are expected to remain high.
Aluminum
Overnight, the most-traded SHFE 2403 aluminum contract opened at 18,925 yuan/mt, with its lowest and highest at 18,875 yuan/mt and 18,995 yuan/mt before closing at 18,990 yuan/mt, up 125 yuan/mt or 0.66%. LME aluminum opened at $2,222.5/mt yesterday, with its high and low at $2,244/mt and $2,205/mt respectively before closing at $2,232/mt, up $10/mt or 0.45%.
On the macro front, the US Markit PMI data for January exceeded expectations. The data demonstrated the resilience of the US economy, and expectations for interest rate cuts once again cooled significantly. In China, the macroeconomic environment was positive. The People’s Bank of China announced RRR cuts and will continue to keep a close eye on development of real estate, boosting domestic market sentiment. In terms of fundamentals, as CNY is drawing near, downstream consumption slowed down, but inventories remained at low levels driven by a high aluminum liquid ratio and downstream stockpiling before the CNY holiday. SMM predicts that the total domestic inventory accumulation during the 2024 CNY holidays may be lower than levels for the same period of previous years. In the short term, amid low inventory and no obvious imbalance between supply and demand, aluminum prices may fluctuate along with macro sentiment before CNY holidays.
Lead
LME Lead Prices Fell to $2123/mt Overnight
LME lead prices opened at $2150.5/mt and closed at $2145/mt, down 0.26%, with the low-end of $2123.5/mt and the high-end of $2168/mt.
The most active SHFE 2403 lead contract prices opened at 16335 yuan/mt last evening, and closed at 16340 yuan/mt, a gain of 0.18%, with the high-end of 16410 yuan/mt and the low-end of 16270 yuan/mt.
Zinc
SHFE Zinc has been supported and moved upward [SMM Zinc Morning Comment]
Overnight, LME zinc prices opened at US$2,581/ton and reached a low of US$2,567/ton during the period. During the European trading session, LME zinc prices moved up and hit a high of US$2,605.5/ton, finally closing at US$2,587/ton, up US$0.5/ton, or 0.02%. The trading volume decreased by 3,005 lots to 9,137 lots, and the open interest decreased by 4,156 lots to 216,000 lots. LME zinc inventory fell by 2,100 tons to 193,475 tons, a decrease of 1.07%. The initial value of the annualized real GDP in the United States in the fourth quarter exceeded expectations and recorded 3.3%. Economic data are relatively strong and inflationary pressures have eased, driving the U.S. dollar index to rise, putting pressure on LME zinc. However, LME inventories have continued to fall to recent lows. With fundamental support, LME zinc moved rangebound.
The most interest-traded SHFE 2403 zinc contract opened at 21440 yuan/mt last evening and settled at 21440 yuan/mt, up 95 yuan/mt or 0.45%. Trading volume decreased 59492 to 42951 lots, and open interest gained by 872 lots to 90,400 lots. Favourable policies, tight ore supply and the closed import window for refined zinc bolstered SHFE zinc prices.
Tin
SHFE 2402 tin contract rose slightly to 222,620 yuan/mt before closing at 221,860 yuan/mt overnight, up 0.83%.
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 200-800 yuan/mt against SHFE 2402 tin contract, versus discounts of 300 yuan/mt to premiums of 600 yuan/mt for delivery brands, premiums of 300-1,000 yuan/mt for Yunxi brand, and discounts of 1000-1300 yuan/mt for imported brand tin ingots. Tin prices inched lower and then rebounded yesterday, and traders reported that the downstream customers were cautious about placing orders.
Nickel
Overnight, the most-traded SHFE nickel contract opened at 130370 yuan/mt, and closed at 129720 yuan/mt, down 60 yuan/mt. Trading volume rose 7374 lots, and open interest increased by 908 lots. The inflation indicator favored by the Federal Reserve will be released on Friday, and market expectations for a March interest rate cut have "cooled". In addition, the Bank of Japan stated that it will continue to maintain ultra-loose monetary policy. From a fundamental point of view, nickel price in spot market rose due to the impact of rising SHFE nickel price, and the transaction sentiment in the spot market has cooled down. With the arrival of some pure nickel, the supply has increased. Nickel price is expected to swing on a soft note.