SMM Evening Comments (Dec 31): Shanghai nonferrous metals fell across the board

SHANGHAI, Dec 31 (SMM) – SHFE nonferrous metals broadly fell on Thursday December 31 as multiple markets closed early for New Year's Eve.

China on Thursday said its factory activity expanded in December. The country's official manufacturing Purchasing Managers' Index (PMI) for December came in at 51.9, according to data from the National Bureau of Statistics.

That was a slight decline compared to November's reading of 52.1. Still, the December figure was above the 50-level that separates expansion from contraction.

Nickel led the losses and slumped 1.73%, copper slipped 0.99%, zinc eased 1.17%, aluminium lost 0.1%, tin went down 1.34% and lead decreased 0.58%.

The ferrous complex rose across the board. Iron ore advanced 2.05%, rebar rose 3.32%, and hot-rolled coil climbed 3.29%.

Copper: The most-traded SHFE 2102 copper contract finished the day 0.99% lower at 57,750 yuan/mt. Open interest fell 7,961 lots to 105,758 lots. Senate Majority Leader McConnell ruled out the possibility of passing the $2,000 personal bailout subsidy legislation in the near future. In addition, the leaders of China and Europe jointly announced the completion of the China-EU investment agreement negotiations on schedule, highlighting the deepening of bilateral economic relations. The British House of Commons passed the post-Brexit trade agreement between Britain and Europe and is expected to sign legislation. In terms of data, the US merchandise trade deficit in November expanded to a record high before the holiday, due to a record import of consumer goods. In November, the number of second-hand housing contracts dropped for the third consecutive month, and the high housing prices and limited housing supply are slowing down the property market. On the last day of the year-end, the market was still dominated by risk aversion, and the mood of bulls leaving before the holiday was obvious. US Initial Jobless Claims will come under scrutiny tonight.

Aluminium: The most-liquid SHFE 2102 aluminium contract finished the day 0.1% lower at 15,460 yuan/mt. Open interest fell 1,349 lots to 112,085 lots.

Zinc: The most-active SHFE 2102 zinc contract closed down 1.17% at 20,675 yuan/mt. Open interest fell 3,939 lots to 82,749 lots. Recently, long positions left the market due to the overseas pandemic and the expected weakening of domestic consumption in January, leading to a decline in zinc prices. However, for now, the fundamentals of zinc are still improving, TCs for zinc ore fell again in January, and the spot-end social stocks continued to decline, so it is expected that there is little room for further decline in zinc prices.

Nickel: The most-traded SHFE 2103 nickel contract ended the day 1.73% lower at 123,580 yuan/mt today. Open interest rose 1,281 lots to 154,265 lots. It is predicted that after the traders return to the market after the New Year, nickel prices will keep fluctuating at high in January 2021. Under the medium and long-term inflation expectations, the contract is expected to keep rising. It is estimated that SHFE nickel will trade between 120,000-134,000 yuan/mt in January.

Lead: The most-traded SHFE 2102 lead contract slid to a session low of 14,560 yuan/mt and ended the day 0.58% lower at 14,625 yuan/mt. Open interest rose 132 lots to 31,284 lots. On the eve of New Year's Day, the contract was under pressure amid the general decline of domestic base metals, and pared the night gains. The market has entered the last trading day before year-end, and trading in the spot market is tepid on the fundamentals. It is expected that long and short positions will trade in a cautious manner tonight, and the contract will keep fluctuating rangebound between moving averages.

Tin: The most-liquid SHFE 2103 tin contract rose to an intraday high of 152,550 yuan/mt and finished the day 1.34% lower at 151,170 yuan/mt today. Open interest rose 337 lots to 31,376 lots. The contract is expected to keep fluctuating in the near term. Pressure above is expected to around 155,000 yuan/mt. Support below is expected to around 150,000 yuan/mt.