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October 20, 2020

SMM Morning Comments (Oct 20): Shanghai base metals were mostly lower, China’s latest benchmark lending rate came out

SHANGHAI, Oct 20 (SMM) — Shanghai base metals, except for zinc and tin, cruised lower on Tuesday morning, while their counterparts on the LME traded mixed.


China’s latest one-year and five-year loan prime rates (LPRs) were left unchanged on Tuesday, in line with expectations from a majority of traders and analysts. At present, the one-year LPR stands at 3.85% while the five-year rate is at 4.65%.


Shanghai base metals closed mixed in overnight trading. Copper edged up 0.06%, zinc rose 0.65% and tin climbed 0.74%, while aluminium weakened 0.54%, lead slid 0.59% and nickel fell 0.72%.

The LME complex rose for the most part on Monday. Zinc jumped 2.26% to lead the gains, tin rose 1.28%, copper strengthened about 0.6% and lead added 0.34%, while aluminium and nickel underperformed with 0.97% and 0.2% losses respectively.


Copper: Three-month LME copper surged to its highest in nearly one month at $6,812/mt on Monday, before relinquishing some gains to end about 0.6% firmer at $6,768/mt. It is likely to trade between $6,730-6,780/mt today.

The most-traded SHFE 2011 copper contract edged up 0.06% to settle at 51,320 yuan/mt in overnight trading. It is expected to move between 51,000-51,500 yuan/mt today, while spot premiums will be seen lower at 140-200 yuan/mt.

US Democrats and the White House narrowed their differences on a fiscal stimulus package and will continue their talks today, determining whether legislation on the stimulus could be pushed through before the Nov. 3 election. But investors remained cautiously optimistic about the package. Overnight, the US dollar index, which measures the greenback against a basket of leading currencies, fell sharply, and this, combined with continuing economic recovery in China, boosted copper futures.


Aluminium: Three-month LME aluminium slid 0.97% to settle at $1,845.5/mt on Monday, and is expected to trade between $1,830-1,870/mt today.

The most-liquid SHFE 2011 aluminium contract declined 0.54% to close at 14,755 yuan/mt in overnight trading, and is likely to fluctuate between 14,600-15,000 yuan/mt today.


Zinc: Three-month LME zinc jumped 2.26% to close at $2,485/mt on Monday, after hitting its highest in nearly one month at $2,498.5/mt earlier in the session. Zinc stocks across LME-listed warehouses expanded 500 mt, or 0.23%, to 220,275 mt. Expectations of an agreement between US Democrats and Republicans on fiscal stimulus package before the Nov. 3 election and weaker US dollar provided traction to LME zinc, but surging coronavirus cases globally limited its increase. LME zinc is likely to trade between $2,410-2,460/mt today.

The most-traded SHFE 2011 zinc contract cruised 0.65% higher to close at 19,285 yuan/mt in overnight trading. The upcoming US presidential election, uncertainties over Brexit trade talks and rising COVID-19 cases cast a shadow on demand and supply of refined zinc at the end of this year. The November zinc contract is expected to move between 19,200-19,700 yuan/mt today, while spot premiums will be seen stable at 170-190 yuan/mt.


Nickel: LME nickel surged to a fresh high in eleven months on Monday.

The most-liquid SHFE 2012 nickel contract slid 0.72% to close at 119,140 yuan/mt in overnight trading, and is expected to fluctuate around 119,000 yuan/mt today.


Lead: Three-month LME lead rose rapidly to an intraday high at $1,771.5/mt in the morning of Asian trading hours, but later dropped to an intraday low at $1,752/mt before reversing some losses to settle 0.34% higher at $1,756.5/mt on Monday.

The most-active SHFE 2011 lead contract weakened 0.59% to end at 14,295 yuan/mt in overnight trading. Moderate downstream demand and support from secondary lead costs may help the contract stem the decline.


Tin: Three-month LME tin surged to a more than one-year high at $18,755/mt on Monday before giving up some gains to end 1.28% higher at $18,570/mt. Weaker US dollar, economic recovery in China, the world’s largest tin consumer, and worries about global tin ore shortages contributed to the increase.

The most-liquid SHFE 2012 tin contract rose 0.74% to close at 147,100 yuan/mt on overnight trading, and is expected to trade between 146,000-148,500 yuan/mt today.

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