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November 9, 2020

SMM Morning Comments (Nov 9): Shanghai base metals were mostly higher as investors react to Biden’s presidential election win

SHANGHAI, Nov 9 (SMM) — Nonferrous metals on the SHFE were mostly higher on Monday morning, and their counterparts on the LME also rose for the most part, as investors in the region reacted to Democrat Joe Biden’s defeat of incumbent Donald Trump in the US. presidential race


Shanghai base metals mostly advanced in overnight trading. Copper added 0.7%, zinc inched up 0.98%, aluminium rose 0.61%, lead climbed 0.56% and tin strengthened 0.59%, while nickel weakened 1.81%.


The LME complex also rose for the most part. Copper jumped 1.19% to lead the gains, zinc advanced 1.15%, aluminium added 0.45% and tin edged up 0.71%, while nickel and lead underperformed with 1.38% and 0.38% losses respectively.


Copper: Three-month LME copper added 1.19% to end at $6,947/mt on Friday, and is likely to trade between $6,900-6,980/mt today.

The most-active SHFE 2012 copper contract advanced 0.8% to close at 51,840 yuan/mt in overnight trading, and it is expected to move between 51,600-52,100 yuan/mt today, while spot premiums will be seen at 100-170 yuan/mt.

Macro sentiment turned to optimism, supporting the contract. Biden defeated Trump last week and was elected the 46th president of the US. The market generally expects the US government to introduce a larger stimulus plan in the future. In terms of data, the improvement of the US job market in October exceeded expectations. The nonfarm employment population increased 638,000 In October, higher than the expected 600,000. The unemployment rate fell to 6.9% in October, the sixth consecutive month of decline. At present, considering the spread of the second round of pandemic, the road to economic recovery is still full of uncertainties, and there is a certain wait-and-see mood in the market. Whether Biden's ruling outline and fiscal stimulus plan can be released as soon as possible will be monitored this week. On the spot side, the market risk aversion still exists, and the spot market may fall back into a stalemate.


Zinc: Three-month LME zinc rose 1.15% to close at $2,637/mt on Friday. Zinc stocks at LME-listed warehouses remained unchanged at 217,800 mt. Last Friday, the US dollar weakened, which provided upward momentum for nonferrous metals. In addition, Nonfarm Payroll Employment in the US exceeded expectations in October. However, the pandemic continued, limiting the upward space of LME zinc. Macro guidelines will be monitored in the near term. It is likely to trade between $2,590-2,640/mt today.

The most-liquid SHFE 2012 zinc contract added 0.98% to end at 20,100 yuan/mt in overnight trading. Fundamentally, although the tight supply pressure at the mine end still exists, the decline rate of TCs has slowed down. The consumption in northern China seasonally weakened in winter, and at the same time, it is faced with the rigid restriction of environmental protection pressure, and there is a marginal deterioration possibility of consumption, which may limit the upward space of SHFE zinc. The December zinc contract is expected to move between 19,700-20,200 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen higher at 150-160 yuan/mt.


Nickel: The most-active SHFE 2102 nickel contract fell 1.81% to close at 114,700 yuan/mt on Friday. Open interests rose 10,461 lots to 107,000 lots. Market reaction after the general election results are basically settled will be monitored in the near term.

Recently, the US election event has shaken the market nerves. On fundamentals, due to the impact of the decline in the futures price of large stainless steel factories, the price of nickel pig iron is unlikely to be high, and there is a risk of weakening. The overall performance of the industrial chain is weak. The increase caused by the emotions affected by the suspension of nickel mines has been realized, and there is a need for a callback in the market recently. Except for the sluggish shipment of stainless steel and the increased profit pressure, which depressed the nickel purchase prices, the performance in other aspects was acceptable, and the signs of further decline needed to wait and see. Macroscopically, the US election is in full swing, with the recent sharp rise in US stocks and the general increase in LME metal. However, there is still a strong wait-and-see mood for nickel futures. The impact of macro events such as the US election and the trend of the US dollar on nickel prices will come under scrutiny recently. Shanghai nickel is expected to trade between 115,000-118,000 yuan/mt and LME nickel is expected to trade between $15,200-15,650 /mt this week.


Lead: Three-month LME lead rose to an intraday high at $1,863/mt before repairing some gains to settle 0.38% lower at $1,833/mt on Friday. The Impact of post-election stimulation bill on metals in the US will come under scrutiny.

The most-active SHFE 2012 lead contract trended higher on Friday night, ending 0.56% higher at 14,420 yuan/mt. Domestic lead prices are expected to keep fluctuating at low in the near term.


Tin: Three-month LME tin closed up 0.71% at $18,385/mt on Friday, after hitting an intraday low at $18,255/mt earlier in the session. Due to the expectation of reduced fiscal stimulus, the yield of long-term US bonds has dropped sharply, and the rebound of stock market and other risky assets has made the dollar bear continuous pressure. The speech delivered by President-elect Joe Biden to the US in Wilmington, Delaware will be monitored today. Pressure above will be seen from $18,700/mt today.

The most-liquid SHFE 2101 tin contract closed down 0.35% at 147,250 yuan/mt on Friday night. SHFE tin is likely to have insufficient upward momentum in the near term, and is expected to fluctuate robustly today. Support below will be seen from 145,000 yuan/mt today. Pressure above will be seen from 148,000 yuan/mt today.

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