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November 23, 2020

SMM Morning Comments (Nov 23): Shanghai base metals were mostly higher as investors watch for coronavirus developments

SHANGHAI, Nov 23 (SMM) — Shanghai base metals on the SHFE were mostly higher on Monday morning, and there counterparts on the LME also rose for the most part, as investors continue to watch for coronavirus developments.


Shanghai base metals mostly advanced in overnight trading. Copper added 2.13%, aluminium rose 0.13%, lead surged 4.05%, zinc went up 1.07% and nickel strengthened 1.79%, while tin fell 0.23%.


The LME complex also rose for the most part. Lead climbed 2.94% to lead the gains, copper advanced 2.41%, nickel added 1.89% and zinc edged up 1.71%, while aluminium and tin underperformed with 0.1% and 0.13% losses respectively.


Copper: Three-month LME copper rose 2.41% to end at $7,261/mt on last Friday, and is likely to trade between $7,220-7,300/mt today.

The most-active SHFE 2101 copper contract went up 1.29% to close at 54,210 yuan/mt in overnight trading, and it is expected to move between 53,900-54,400 yuan/mt today, while spot premiums will be seen at 100-180 yuan/mt.

Good news of vaccine dilutes the pessimism that pandemics continue to spread to some extent, and the uncertain factors continue to decrease, which provides some momentum for the rise of copper prices. On fundamentals, domestic inventories continued to decline. SMM data showed that social inventories decreased 23,800 mt to 218,700 mt last Wednesday, and social inventories have declined for six consecutive weeks. In addition, SHFE inventories decreased 21,183 mt month on month, and the inventories continuously dropped to a low level below 100,000 mt. Inventories continued to decline, which brought support and rebound momentum to copper prices. On the spot side, the premium is likely to rise due to the surge of last Friday.


Aluminium: Three-month LME aluminium fell 0.1% to close at $1,987/mt on last Friday, with open interest rising to 726,000 lots. It is expected to trade between $1,970-2,010/mt today.

The most-liquid SHFE 2012 aluminium contract went down 0.78% to settle at 15,835 yuan/mt on Friday night, and is likely to trade between 15,600-16,000 yuan/mt today. The spot premium supports aluminium prices with low inventories, and the callback space below is limited.


Zinc: Three-month LME zinc rose 1.71% to close at $2,800/mt on last Friday. The good news of the two vaccines raised the hope of lifting economic restrictions and supported the contract, but the severe pandemic situation is expected to limit the upward space. The contract is likely to trade between $2,760-2,810/mt today.

The most-liquid SHFE 2101 zinc contract rose 1.14% to end at 21,225 yuan/mt in overnight trading. Domestic TC continued to decline. Zinc mine in South Africa was suspended with the maintenance plan of some domestic smelters, leading to active bullish sentiment and supporting the upward trend of zinc prices. However, domestic stocks rose slightly, and the downstream consumption was slightly weakened, which was expected to drag down the upward space of zinc prices. The SHFE zinc contract is expected to move between 20,800-21,300 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen higher at 120-140 yuan/mt.


Nickel: The most-active SHFE 2102 nickel contract rose 1.88% to close at 119,100 yuan/mt on last Friday. Open interests rose 4,264 lots to 151,000 lots. The new progress of vaccine stimulated the general increase of metals, but the pandemic spread rapidly and the market worries still existed. The vaccine delivery took time, and it returned to the fundamentals after short-term benefits. The improvement of fundamentals still takes time, and the nickel price is obviously dragged down by downstream stainless steel. It is expected that the increase of nickel price will be limited in the near term. The contract will test support from 119,000 yuan/mt today.

SHFE nickel is expected to trade between 115,000-120,000 yuan/mt and LME nickel is expected to trade between $15,650-16,150/mt this week.


Lead: Three-month LME lead settled 2.94% higher at $2,030/mt on last Friday. The optimistic trend of general increase of LME metals continued. LME Lead rose for nine consecutive days, and the upward trend of LME lead continued.

The most-active SHFE 2101 lead contract trended higher on Friday night, ending 4.05% higher at 15,535 yuan/mt. Influenced by the general increase of domestic basic metals and the continuous upward trend of LME lead, SHFE lead went up steadily at night. In addition, the recent reduction and suspension of production caused by environmental protection and the unknown influence of weather also gave SHFE lead an upward support. However, it is still necessary to pay attention to the pressure of cautious purchasing sentiment in the downstream of the domestic spot market on lead prices.


Tin: Three-month LME tin closed down 0.13% at $18,725/mt on last Friday. The U.S. Treasury and the Federal Reserve clashed over the emergency loan plan. Federal Reserve Chairman Powell said that the Federal Reserve would return unused funds to the Treasury as required. LME tin is expected to keep fluctuating in the near term, and the guidance of the US dollar will be monitored. Pressure above will be seen from $190,000 /mt today. Support below will be seen from $185,000/mt today.

The most-liquid SHFE 2101 tin contract fell 0.16% at 146,520 yuan/mt on Friday night. The contract is expected to keep fluctuating in the near term. Pressure above will be seen from 148,000 yuan/mt today. Support below will be seen from 145,500 yuan/mt today.

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