Non-ferrous metals markets showed resilience on Friday as geopolitical tensions eased and currency movements supported price action, with both copper and zinc expected to maintain elevated levels in the near term, according to analysis from SunSirs. Copper markets rebounded strongly following remarks from Trump indicating that the US would not attack Iran before the midterm elections. The offshore RMB strengthened significantly, improving overall market risk appetite.
The LME 3-month copper contract closed up 1.79% at $14,550 per tonne, while the SHFE copper benchmark contract settled at 110,530 RMB per tonne. On the inventory front, LME copper stocks declined by 220 tonnes to 233,025 tonnes, with the proportion of cancelled warrants falling. The Cash/3M spread remained in backwardation, widening to $135.8 per tonne.
SHFE weekly inventories increased by 2,000 tonnes to 59,000 tonnes, with daily warrants up 60 tonnes to 8,000 tonnes. The spot premium over futures in East China stood at 540 RMB per tonne, while Guangdong saw a 450 RMB per tonne premium. Domestic import profit for spot copper was approximately 600 RMB per tonne, with the price spread between refined and scrap copper narrowing slightly to 3,970 RMB per tonne.
Industrially, the supply of copper concentrate and scrap remains tight, and domestic refined copper production is expected to decrease. Uncertainty regarding US tariffs on refined copper persists, though price spread relationships indicate that tariff expectations have not been fully eliminated. Against this backdrop, copper prices remain supported and are likely to fluctuate at high levels in the short term.
Reference trading ranges for the SHFE copper benchmark contract are 109,500 to 111,200 RMB per tonne, while LME 3-month copper is projected at $14,400 to $14,700 per tonne. Zinc prices also showed resilience following the week's developments. The SHFE zinc index closed down 0.52% at 25,942 RMB per tonne with total open interest at 230,300 lots.
LME zinc (Cash-3M) rose by $1 per tonne from the previous day to $3,766 per tonne, with total open interest at 258,100 lots. The average price of SMM #0 zinc ingots stood at 25,930 RMB per tonne. Zinc warehouse inventories showed mixed signals, with SHFE zinc ingot warehouse stocks at 79,500 tonnes and LME zinc ingot stocks at 126,900 tonnes with cancelled warrants at 13,800 tonnes.
After adjusting for exchange rates, the SHFE/LME price ratio was 1.032. Social inventories of zinc ingots in major domestic markets totaled 178,900 tonnes on October 8, representing an increase of 8,200 tonnes from September 30. On the supply side, port inventories of zinc concentrate have risen slightly recently, though smelter inventories have declined further.
Treatment charges for zinc concentrate have dropped significantly, with the supply of zinc ore remaining tight. Although operating rates at downstream primary processing enterprises have declined marginally, domestic enterprises have restocked at lower price levels, leading to a significant increase in downstream raw material inventories. SunSirs analysts note that following a sharp drop in zinc prices, the export window has closed and the rate of destocking for domestic zinc ingots has slowed.
From a macroeconomic perspective, persistent overseas pressures driven by high interest rates and oil prices suggest a significant risk of further price declines as LME inventories build up. However, in the near term, both copper and zinc prices are expected to maintain elevated levels as supply constraints and geopolitical easing provide underlying support to the markets.
Source: sunsirs.com