SMM Morning Comments (Sep 23): Base Metals Generally Increased Despite Strengthened US dollar

SHANGHAI, Sep 23 (SMM) – Shanghai base metals basically cruised higher on Thursday morning amid strong restocking demand before China’s National Day holiday. Meanwhile, their counterparts on LME performed similarly.

LME base metals generally rose in the intraday or overnight trading on Wednesday. Copper gained 3.09%, aluminium rose 3.13%, zinc increased 1.05%, and lead fell 1.33%.

SHFE base metals closed mixed overnight. Copper gained 0.44%, aluminium rose 1.02%, lead fell 0.6%, and zinc dropped 0.46%.

Copper: Three-month LME copper gained 3.09% on Wednesday night to close at $9,262.5/mt after hitting the highest price at $9,335/mt, and is expected to trade between $9,200-9,290/mt today. The open interest reached 258,000 lots.

The SHFE 2110 copper contract gained 0.44% last night to close at 69080 yuan/mt, with the highest and lowest prices at 69,300 yuan/mt and 68,750 yuan/mt, and is expected to trade between 68,700-69,300 yuan/mt today, with spot premiums between 160-380 yuan/mt.

Evergrande Group agreed to pay bond interest yesterday, which eased market worries to a certain extent, and copper futures closed higher overnight. In addition, Fed Chairman Powell said that it may start to reduce the scale of asset purchases in November and complete the reduction by mid-2022. Affected by its statement, the US dollar index rebounded sharply overnight, which is expected to put some pressure on copper prices today. Market trade picked up on the first trading day after the holiday yesterday. Despite the dual control policy impact in Jiangsu, Zhejiang, Shandong, and other regions, downstream users still need to restock for the 7-day National Day holiday. Spot premiums are expected to stand firm before the long-term order delivery this week.

Aluminium: Three-month LME aluminium opened at $2,853/mt yesterday and closed at an intraday high at $2,942/mt, an increase of $89/mt or 3.13%.

Overnight, the most-traded SHFE 2111 aluminium contract opened at 23,390 yuan/mt, with the highest and lowest prices at 23,495 yuan/mt and 23,135 yuan/mt before closing at 23,315 yuan/mt, up 235 yuan/mt or 1.02%. Open interest rose 13,000 lots to 295,000 lots, and trading volume was 187,000 lots. SHFE aluminium will test resistance at 23,500 yuan/mt today, and the market will continue to pay attention to the implementation of power rationing policies in different regions.

Lead: Three-month LME lead closed $28.5/mt or 1.33% lower at $2,121.5/mt in the overnight trading yesterday, after hitting a nearly 5-month low at $2,108.5/mt. LME lead weakened amid rising US dollar Today’s focus will be the pressure at the high of Bollinger Band.

The SHFE lead fell to a 13-month low at 14,055 yuan/mt and closed at 14,065 yuan/mt last night, a decrease of 85 yuan/mt or 0.6%. Today’s focus will be the support at 14,000 yuan/mt.

Zinc: Three-month LME zinc opened at $2,999.5/mt yesterday, and hit a high of $3,058.5/mt before closing at $3,027.5/mt, an increase of $31.5/mt or 1.05%. The trading volume rose to 11,000 lots, and open interest decreased by 1,098 lots to 261,000 lots. LME zinc inventory decreased by 1,475 mt to 221,000 mt, a drop of 0.66%. Base metals prices rose across the board metals due to eased concerns of global economic growth. Three-month LME zinc is expected to move between $2,990-3,040/mt today.

Overnight, the most-traded SHFE 2111 zinc contract opened at 22,805 yuan/mt and fell to 22,550 yuan/mt before closing at 22,555 yuan/mt, down 105 yuan/mt or 0.46%. Trading volume was 44,129 lots, and open interest increased by 1,262 lots to 67,543 lots. Power rationing has disrupted smelter production, but the release of zinc ingots from the SRB eased tight supply to a certain extent. The low zinc inventory is unlikely to alleviate in the short term. The "dual” control of energy consumption has affected downstream production, and export orders showed signs of weakening. Overall, the fundamentals are relatively weak. The most-traded SHFE 2111 zinc contract is expected to move between 22,400-22,900 yuan/mt on today. #0 domestic Shuangyan zinc is likely to trade at premiums of 170-180 yuan/mt over the SHFE 2110 zinc contract.

Tin: Overnight, SHFE tin fell and moved between 272,000-276,000 yuan/mt for most of the time. The impact of power rationing on tin production is limited. Tin inventory remains low, and the spot market is tight. Increased output of downstream companies and expectations of MoM growth of downstream production supported tin prices. Longs may try to inflate prices amid tight spot supply before they take profits at highs. The most-traded SHFE tin contract is expected to meet resistance at 277,500 yuan/mt and find support at 272,000 yuan/mt today.