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November 26, 2020

SMM Morning Comments (Nov 26): Shanghai base metals were mostly lower as investors reacted to Fed meeting minutes

SHANGHAI, Nov 26 (SMM) — Shanghai base metals mostly declined on Thursday morning, as investors reacted to minutes released overnight from the US Federal Reserve's November meeting. Meanwhile, their counterparts on the LME were mostly higher on the board.


Investor reaction to minutes from the Fed's meeting earlier this month was watched. That summary showed officials at the U.S. central bank discussing ways of providing more accommodation to the economy as the recovery from the coronavirus pandemic continued.


Shanghai base metals, expect for tin, closed lower on Wednesday night. Tin added 0.32%, while zinc went down 0.34%, copper weakened 0.16%, aluminium shed 0.34%, lead slid 0.56%, and nickel fell 0.95%.


The LME complex mostly advanced on Wednesday. Copper advanced 0.23%, tin edged up 0.4%, zinc climbed 0.33% and lead increased 0.17%, while aluminium and nickel underperformed with 0.86% and 1.2% losses respectively.


Copper: Three-month LME copper rose 0.23% to end at $7,326/mt on Wednesday, and is likely to trade between $7,290-7,370/mt today.

The most-active SHFE 2101 copper contract went down 0.16% to close at 54,640 yuan/mt in overnight trading, and it is expected to move between 54,300-54,800 yuan/mt today, while spot premiums will be seen at 120-180 yuan/mt.

It was announced at night that the number of initial jobless claims as of November 21 in the US stood at 778,000, and the number of jobless claims has increased for two consecutive weeks. The surge of confirmed cases of COVID-19 has damaged the sustained recovery of the labor market, and the cautious sentiment has dragged down US stocks from a high level. Good news appeared in terms of data. The revised value of US GDP in the third quarter announced yesterday was in line with expectations, and durable goods orders exceeded expectations. In addition, yesterday's minutes of the Federal Reserve showed that many officials discussed strengthening the guidelines for debt purchase as soon as possible. Overnight, the US dollar index continued to weaken and fell back to below 92. Copper futures fluctuated at night, and there was still room for growth in the near term. On the spot side, the contract continued to fluctuate at a high level, the pressure on premium was obvious, and the downstream mainly maintained the basic need for purchasing. Changes in domestic inventory will continue to be monitored, and the stalemate between supply and demand is likely to continue before the end of the month.


Zinc: Three-month LME zinc rose 0.33% to close at $2,759/mt on Wednesday. Zinc stocks at LME-listed warehouses fell 275 mt to 222,300 mt. Overnight, the US dollar fell again to provide upward momentum for LME zinc, and the good news of vaccine continued with the market expectation of the US stimulus policy, improving the market sentiment. However, Initial Jobless Claims for last week unexpectedly increased in the first two weeks since July, indicating that the economic recovery momentum of the US weakened and the increase is expected to be limited. The contract is likely to trade between $2,730-2,780/mt today.

The most-liquid SHFE 2101 zinc contract fell 0.37% to end at 20,795 yuan/mt in overnight trading. Domestic TC has been continuously lowered, and the ore shortage still exists. Smelters also have plans for maintenance and production reduction, and the tight supply side supports the upward trend of zinc prices. US-China trade relations will be monitored recently. The SHFE zinc contract is expected to move between 20,700-21,200 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen higher at 130-140 yuan/mt.


Nickel: The most-active SHFE 2102 nickel contract fell 0.95% to close at 119,370 yuan/mt on Tuesday. Open interests fell 4,191 lots to 152,000 lots. Pressure above will be seen from 121,000 yuan/mt today. The contract will test support from 119,000 120,000 yuan/mt today.


Lead: Three-month LME lead settled 0.17% higher at $2,023.5/mt on Wednesday. Overnight, LME lead rose for two consecutive days, vaccine news frequently boosted the market, and US stocks rose and US index fell to support basic metals.

The most-active SHFE 2101 lead contract trended lower on Wednesday night, ending 0.56% lower at 15,200 yuan/mt. It is still necessary to pay attention to the impact of the change of production reduction and resumption in secondary lead smelters and environmental protection and limited production areas on lead prices.


Tin: Three-month LME tin closed up 0.4% at $18,735/mt on Wednesday. LME tin is expected to keep fluctuating in the near term. The US economic data performed mixed, and the minutes of the Federal Reserve showed that many officials discussed strengthening the guidelines for debt purchase as soon as possible. LME zinc is expected to keep fluctuating, and the weak US dollar will give support to the contract. Pressure above will be seen from $188,000 /mt today. Support below will be seen from $185,000/mt today.

The most-liquid SHFE 2101 tin contract rose 0.79% at 146,330 yuan/mt on Wednesday night. The contract is expected to keep fluctuating around day moving average in the near term. Pressure above will be seen from 147,500 yuan/mt today. Support below will be seen from 145,500 yuan/mt today.

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