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November 2, 2020

SMM Morning Comments (Nov 2): Shanghai base metals were mostly lower amid concern rising coronavirus cases could slow the global economy

SHANGHAI, Nov 2 (SMM) — Shanghai base metals mostly declined on Monday morning, while there counterparts on the LME also fell for the most part, as England adopted a stay-at-home order and as traders braced for Tuesday's U.S. presidential election, where a contested fight for president or the Senate could delay a much-needed fiscal stimulus for the U.S. economy.


Shanghai base metals, expect for aluminium, closed lower on last Friday night. Aluminium, the best performer, added 1.77%, while copper weakened 0.23%, zinc shed 0.31%, lead slid 0.62%, nickel fell 2.4% and tin declined 0.36%.


The LME complex ended mostly lower on Friday. Copper edged down 0.42%, zinc weakened 1.12%, nickel shed 2.12%, lead fell 1.2% and tin lost 1.06%, while aluminium added 2.44%.


Copper: Three-month LME copper weakened 0.42% to end at $6,713/mt on Friday, and is likely to trade between $6,60-6,740/mt today.

The most-active SHFE 2012 copper contract weakened 0.23% to close at 51,060 yuan/mt in overnight trading, and it is expected to move between 50,800-51,300 yuan/mt today, while spot premiums will be seen at 110-200 yuan/mt.

The contract fluctuated last week, and it's rising momentum was insufficient due to the outbreak of the second round of pandemic in Europe and US and the repeated postponement of the economic bill, which suppressed the risk appetite. As of last Friday, in order to cope with the continuous spread of the COVID-19, more than 12 countries in Europe adopted "blockade" measures. The declines of the three major futures indexes of US stocks all expanded to about 1% in overnight trading, and the US dollar index continued to rise, suppressing copper prices. This week will usher in the US general election, and the market expects that after the general election, various economic measures will bring good news for copper futures. In terms of spot, whether the inventory data can promote the activity of spot transactions and keep the quotation firm will be monitored.


Aluminium: Three-month LME aluminium climbed 2.44% to close at $1,848/mt on last Friday, with open interest falling to 743,000 lots. It is expected to trade between $1,820-1,870/mt today.

The most-liquid SHFE 2011 aluminium contract rose 1.98% to settle at 14,655 yuan/mt on Friday night, and is likely to trade between 14,400-14,800 yuan/mt today.


Zinc: Three-month LME zinc weakened 1.12% to close at $2,518/mt on last Friday. Zinc stocks at LME-listed warehouses remained unchanged last week. The single-day confirmed cases in COVID-19 in the US hit a new high and the new blockade measures adopted by Europe may cause the region to fall into recession again, and the market is under pressure due to factors such as uncertain prospects of the US election. It is likely to fluctuate between $2,500-2,550/mt today.

The most-liquid SHFE 2012 zinc contract rose to an intraday high of 19,750 yuan/mt and fell 0.31% to end at 19,565 yuan/mt last Friday. Overseas macro-unstable factors increased. Social inventories continued to increase last Friday, and the consumption of downstream galvanized and die-casting sectors also weakened slightly, and market anxiety warmed up, as SMM surveyed. The December zinc contract is expected to move between 19,300-19,800 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen higher at 150-160 yuan/mt.


Nickel: The most-active SHFE 2012 nickel contract shed 2.4% to close at 115,820 yuan/mt on Friday night.

Macro uncertainties have increased, market panic has caused commodity prices to fluctuate, and next week's US election and stimulus policies may bring new opportunities.


Lead: Three-month LME lead came off an intraday high at $1,837/mt to an intraday low at $1,797/mt before reversing some losses to settle 1.2% weaker at $1,812/mt on last Friday.

The most-active SHFE 2012 lead contract trended lower on Friday night, ending 0.62% lower at 14,375 yuan/mt.


Tin: Three-month LME tin fell 1.06% to end at $17,705/mt on Friday, after hitting an intraday low at $18,000/mt earlier in the session. The US dollar rose 1.4% last week, hitting the biggest weekly increase since September. Investors bought the US dollar in a big way, fearing that the election results would be controversial and that the re-blockade in some parts of France, Germany and Spain would affect the economy. Support below will be seen from $17,300/mt today.

The most-liquid SHFE 2012 tin contract closed down 0.09% at 142,590 yuan/mt on Friday night. Domestic spot holders are generally reluctant to sell, which has certain support for prices. Support below will be seen from 140,000 yuan/mt today.

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