SMM Morning Comments (Nov 12): Shanghai base metals performance mixed as the pandemic situation remains severe

SHANGHAI, Nov 12 (SMM) — Shanghai base metals traded mixed on Thursday morning following an overnight bounce for tech stocks on Wall Street as a recent rotation into cyclicals paused. Meanwhile, their counterparts on the LME also set for a mixed start.

Shanghai base metals closed mixed in overnight trading. Lead slid 0.55%, zinc declined 1.43% and tin weakened 0.03%, while aluminium climbed 1.1%, copper rose 0.12% and nickel increased 0.34%.

The LME complex performed similarly on Wednesday. Nickel was the best performer with a rise of 0.6%. Aluminium advanced 0.31%, lead edged up 0.08%, while copper slid 1.09%, zinc declined 0.94% and tin weakened 0.36%

Copper: Three-month LME copper fell 1.09% to end at $6,885.5/mt on Wednesday, and is likely to trade between $6,860-7,940/mt today.

The most-active SHFE 2012 copper contract slipped 0.33% to close at 51,790 yuan/mt in overnight trading, and it is expected to move between 51,600-52,000 yuan/mt today, while spot premiums will be seen at 130-180 yuan/mt.

The number of new cases of COVID-19 continues to increase globally, with more than 52.36 million confirmed cases. The number of newly added cases in the US rose for the ninth consecutive week, the death toll from the COVID-19 in Britain exceeded 50,000, and the number of confirmed cases in Germany increased to the maximum since the outbreak. The rebound of the pandemic made the economic outlook more uncertain, and the optimism of the market on vaccines cooled down, while the risk aversion pushed the dollar higher, and it returned to the top of 93 at night, and the pressure on copper was obvious. On the spot side, near the end of the year, long-term negotiation began gradually, and traders dominated the market and were willing to maintain a high premium. In addition, terms of trade is unlikely to improve in the near term with high market supply, and the inventories may continue to decline. It is expected that copper will fluctuate rangebound, and the premium will also maintain high in the near term.

Aluminium: Three-month LME aluminium rose 0.31% to close at $1,917/mt on Wednesday, with open interest rising to 749,000 lots. It is expected to trade between $1,890-1,940/mt today. 

The most-liquid SHFE 2012 aluminium contract added 0.2% to settle at 15,210 yuan/mt on Wednesday night, and is likely to trade between 15,000-15,400 yuan/mt today.

Zinc: Three-month LME zinc fell 0.94% to close at $2,628/mt on Wednesday. Zinc stocks at LME-listed warehouses decreased 200 mt to 221,625 mt. Overnight, when the US dollar strengthened, the market's optimism about vaccines helping to end the COVID-19 crisis subsided, and the worry about the sharp increase in COVID-19 cases around the world hitting economic growth resurfaced. It is likely to trade between $2,600-2,650/mt today.

The most-liquid SHFE 2012 zinc contract weakened 1.43% to end at 19,920 yuan/mt in overnight trading. According to an SMM survey, enterprises in many places cut production and stopped production due to environmental protection amid air warning, and zinc spot fluctuated at high. Downstream demand margin weakened, while TC continued to decrease, and tight supply at zinc ore end still supported zinc prices. The December zinc contract is expected to move between 19,800-20,300 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 rose 0.34% to close at 118,860 yuan/mt on Wednesday. Open interests rose 4,108 lots to 131,000 lots. The rising trend of LME nickel is obvious. The domestic zinc rising rate is small due to the appreciation of yuan. Recently, the fundamentals are mainly dragged down by stainless steel. After the macro bullish factors are exhausted, whether nickel will weaken again should be monitored. The contract will test pressure from 119,000 yuan/mt today.

Lead: Three-month LME lead settled 0.08% higher at $1,868.5/mt on Wednesday. LME lead rose for the second consecutive day. The impact of the change of the US dollar index and global confidence in pandemic prevention and control on the market will come under scrutiny.

The most-active SHFE 2012 lead contract trended lower on Wednesday night, ending 0.55% lower at 14,535 yuan/mt. The upward momentum is slightly insufficient, and it is expected to continue to fluctuate in the near term.

Tin: Three-month LME tin closed down 0.36% at $18,235/mt on Wednesday, after hitting an intraday high at $18,385/mt earlier in the session. Germany Consumer Price Index (CPI) for October, US Initial Jobless Claims as of November 7, and the guiding role of the US dollar in the trend of LME tin will be monitored today. Support below will be seen from $18,000/mt today. Pressure above will be seen from $18,700/mt today.

The most-liquid SHFE 2101 tin contract closed up 0.18% at 145,780 yuan/mt on Wednesday night. Support below will be seen from 144,800 yuan/mt today. Pressure above will be seen from 148,000 yuan/mt today.