SMM Morning Comments (Jan 12): Shanghai base metals fell across the board as Wall Street retreated from all-time highs

SHANGHAI, Jan 12 (SMM) — Nonferrous metals on both SHFE and LME declined across the board on Tuesday morning after shares on Wall Street pulled back overnight from all-time highs.

Shanghai base metals fell across the board in overnight trading. Copper fell 2.52%, aluminium declined 1.32%, zinc shed 2.03%, tin weakened 1.05%, lead slid 1.37% and nickel edged down 3.03%.

The LME complex fell across the board on Monday. Copper plunged 2.97% to lead the losses, zinc fell 1.59%, aluminium weakened 0.42%, tin slid 1.4%, lead edged down 0.8% and nickel dropped 1.91%.

Copper: Three-month LME copper fell 2.96% to end at $7,845.5/mt on Monday, and is likely to trade between $7,820-7,900/mt today.

The most-active SHFE 2103 copper contract went down 1.19% to close at 57,970 yuan/mt in overnight trading, and it is expected to move between 57,800-58,300 yuan/mt today, while spot premiums will be seen at 70-120 yuan/mt.

Recently, the pandemic in Hebei, Heilongjiang, Liaoning and other places rebounded, with the biggest increase in new cases in a single day in five months in China, and the increase in new cases caused demand concerns. The increased scale of US fiscal stimulus boosted the prospect of economic recovery and provided support for the US dollar, and copper prices dropped sharply under pressure. On the spot side, traders have a serious sentiment of holding prices, and the tight market supply leads to the fact that most of them want to restock, which limited the room for price reduction. Moreover, the sharp correction will stimulate traders and large-scale processing enterprises to restock. Before delivery this week, the premium is expected to remain firm and rise steadily.

Zinc: Three-month LME zinc fell 1.48% to close at $2,757.5/mt on Monday. Zinc stocks at LME-listed warehouses fell 250 mt to 201,125 mt. Overnight, the US dollar rebounded slightly, and nonferrous metals showed a correction. The pandemic continued to ferment and further flow restrictions caused market concern. The large-scale stimulus plan brewed by Biden was expected to be challenged in the Senate, causing selling pressure. The Biden administration's stimulus proposal will be monitored in the near term. The contract is likely to trade between $2,730-2,780/mt today.

The most-liquid SHFE 2102 zinc contract fell 2.03% to end at 20,705 yuan/mt in overnight trading. Recently, TC has stopped falling and stabilised, indicating that the tight pattern of the mine end may be improved, while the downstream consumption in northern China has entered a wartime state, and the environmental protection and seasonally-weakening situation in winter dragged down the consumption of galvanizing, and the market may turn into a staged oversupply state. The development of domestic pandemic situation will be monitored. The SHFE zinc contract is expected to move between 20,600-21,100 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen higher at 150-170 yuan/mt.

Nickel: The most-active SHFE 2103 nickel contract fell 3.03% to close at 126,080 yuan/mt on Monday. Open interests fell 808 lots to 169,000 lots. The commodity market was suddenly affected by the news of the Federal Reserve, which caused panic and caused the base metal to fall. The Federal Reserve stated in the minutes of the meeting that "after the maximum employment and price targets are reached, the Federal Reserve will gradually withdraw from easing as in 2013-2014".  Nickel prices fell ahead of other metals due to the down limit of stainless steel contracts.

Lead: Three-month LME lead settled 1.08% lower at $1,975/mt on Monday. The continuous rise of the US dollar index has put upward pressure on base metals. At the same time, the expected slowdown in the US economic recovery and the worrying employment prospects have triggered long positions leaving the market for risk aversion.

The most-active SHFE 2102 lead contract went down 1.37% to close at 14,420 yuan/mt on Monday night. The support below is seen from the cost of secondary lead. Impact of uncertainty of domestic pandemic situation on consumption will be monitored in the near term.

Tin: Three-month LME tin closed down 1.4% at $20,710/mt on Monday. LME base metal plunged across the board as China, the major consumer country, experienced a sharp increase in COVID-19 cases, raising demand concerns. It was aggravated by the strong US dollar and the rising friction between China and the US. The US dollar index rose across the board, continuing the momentum of rebounding from the nearly three-year low hit last week. The soaring yield of US Treasury bonds and the increasing scale of US fiscal stimulus boosted the economic growth prospects, providing support for the US dollar. The trend of the US dollar and the guidance of the surrounding markets on the trend of LME tin will be monitored. The tight supply of refined tin overseas still supports the trend of LME tin. Pressure above will be seen from $21,500 /mt today. Support below will be seen from $20,500/mt today.

The most-liquid SHFE 2103 tin contract fell 0.21% at 153,450 yuan/mt on Monday night. The contract is expected to keep fluctuating today. Support below will be seen from $15,100/mt today. Pressure above will be seen from 156,000 yuan/mt.