SMM Evening Comments (Dec 22): Shanghai nonferrous metals fell across the board as new coronavirus strain in UK weighed on investor sentiment

SHANGHAI, Dec 22 (SMM) – SHFE nonferrous metals broadly fell on Tuesday December 22 following investor jitters overnight on Wall Street over a new coronavirus strain in the UK.

Lead led the losses and slumped 4.53%, copper slipped 2.28%, zinc eased 2.21%, aluminium lost 3.56%, tin went down 1.44% and nickel decreased 4.29%.

A total of 112 vessels carrying 16.8 million mt of iron ore arrived at major Chinese ports during December 13-19, SMM estimates. This was up 2.15 million mt from the previous week and 2.06 million mt from the same period last year. Arrivals at Tangshan port increased one million mt on the week.

The ferrous complex closed mixed. Iron ore decreased 4.78%, rebar slipped 0.25%, while hot-rolled coil rose 0.53%.

Copper: The most-traded SHFE 2102 copper contract finished the day 2.28% lower at 57,900 yuan/mt. Open interest fell 11,327 lots to 114,467 lots.

The rapid spread of new coronavirus strains has led to the closure of most parts of Britain and stricter restrictions in Europe. Market sentiment has turned cautious and risk sentiment has warmed up, which has aroused people's concerns about economic recovery. Even if the US Congress and the House of Representatives are about to vote on the stimulus bill of 900 billion dollars, and the market is generally optimistic about this sentiment, it is difficult to prevent the virus mutation from causing the general decline of the long-term capital market. In addition, it is learned that the UK has put forward a new scheme on fisheries and made a final effort to reach a trade agreement with the EU, which is being considered by the EU. However, the British government reiterated that it would not seek to extend the transition period of Brexit beyond December 31. The overall pandemic dampened the trade. The UK faced the threat of food crisis, and the economy was on the verge of a second recession, which caused the pound to plummet. The US dollar index once returned to around 91, suppressing the contract.

Whether the panic caused by the pandemic will continue to ferment and US GDP for Q3 and pending home sales index for November will come under scrutiny tonight.

Aluminium: The most-liquid SHFE 2101 aluminium contract finished the day 3.56% lower at 15,840 yuan/mt. Open interest fell 10,727 lots to 86,874 lots.

Zinc: The most-active SHFE 2102 zinc contract closed down 2.21% at 21,510 yuan/mt. Open interest fell 3,492 lots to 94,000 lots. In the past two days, the British pandemic has mutated and fermented, and overseas countries have stepped up their blockade measures against the UK. The market panic has revived, and the VIX panic index has risen to a high level since November. The further fermentation of the European pandemic and the effectiveness of Pfizer vaccine for the variant pandemic should be monitored in the near term. The contract will test support from 15- and 20-day moving average tonight.

Nickel: The most-traded SHFE 2103 nickel contract ended the day 4.29% lower at 125,740 yuan/mt today. Open interest rose 348 lots to 118,771 lots.

Lead: The most-traded SHFE 2102 lead contract ended the day 4.53% lower at 14,135 yuan/mt. Open interest fell 2,923 lots to 32,135 lots. The grim situation of the COVID-19 in the UK has plunged the confidence of investors at home and abroad in economic recovery. While the global risk assets generally fell, the US dollar index with high risk aversion property rose, and the macro sentiment turned to pessimism, which put lead prices under pressure. However, after considering entering the European trading time, LME Lead repaired some loss, the fundamental primary and secondary lead discounts rose, and some of primary lead discounts turned into premiums, which brought certain support to SHFE lead. Whether the contract could remain above 14,100 yuan/mt will be monitored tonight.

Tin: The most-liquid SHFE 2102 tin contract climbed to a session high of 152,090 yuan/mt and finished the day 0.89% lower at 150,740 yuan/mt today. Open interest fell 2,845 lots to 26,710 lots. The contract is expected to have downward risk in the near term. Support below is seen from 150,000 yuan/mt. Support above is seen from 153,000 yuan/mt. The guidance of surrounding markets will be monitored.