SMM Morning Comments (Jan 4): LME base metals were mostly lower as coronavirus dominated

SHANGHAI, Jan 4 (SMM) — LME base metals mostly cruised lower on Monday morning, dominated by the coronavirus pandemic and extraordinary stimulus measures that have tried to mitigate the economic hit from the health crisis.

Shanghai base metals Exchange was closed last Thursday for the New Year's holiday.

The LME complex ended mostly lower on Thursday. Copper edged down 1.25%, zinc weakened 1.17%, nickel shed 1.33%, lead fell 0.65% and aluminium lost 0.19%, while tin added 0.42%.

Copper: Three-month LME copper fell 0.84% to end at $7,753.5/mt on Thursday, and is likely to trade between $7,720-7,800/mt today.

The most-active SHFE 2102 copper contract is expected to move between 57,400-57,900 yuan/mt today, while spot premiums will be seen at 10-80 yuan/mt.

According to data released by the US Department of Labor on Thursday, the number of initial jobless claims reached 787,000 in the week ending December 26. The number of initial jobless claims declined for the second consecutive week, but the COVID-19 continues to spread, with the total number of cases in COVID-19 exceeding 20 million and the death cases exceeding 350,000. British Prime Minister Johnson warned that stricter anti-pandemic measures may be needed, including closing schools. Copper prices have limited room to rise in the next period. On the spot side, after the holiday, the market transaction will restart, the market activity will obviously pick up, and the quotation will return to the premium.

Zinc: Three-month LME zinc fell 0.87% to close at $2,749/mt on Thursday. Zinc stocks at LME-listed warehouses fell 200 mt to 202,225 mt. The prospect of increasing the amount of check for pandemic relief in the US is fading, and the market optimism is cooling down. However, with the introduction of COVID-19 vaccine, the global economic prospect is improved with the loose monetary policy of the US, which is expected to still support LME zinc prices. The contract is likely to trade between $2,730-2,780/mt today.

There is no big change in zinc fundamentals in the near term. Domestic TC is lowered again with continuous tight ore end, and the support for zinc prices still exists. Arrivals of imported ore at port will be monitored in the near term. 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 130-150 yuan/mt.

Nickel: The fundamentals are still stable with continuous rigid demand in consumption. As the spot market of stainless steel has improved, steel mills have no possibility of significantly reducing production for the time being. The stable prices of high nickel pig iron are mainly due to the fact that steel mills are not in the procurement cycle at present, and there is a small upward space after the New Year holiday. The trend of slow stocks reduction in refined nickel continues. Shanghai nickel is expected to trade between 122,000-128,500 yuan/mt and LME nickel is expected to trade between $16,500-17,300 /mt this week.

Lead: Three-month LME lead settled 0.13% lower at $1,988.5/mt on Thursday. At the beginning of the new year, base metals generally fell last Thursday night, and the overseas pandemic has not improved. The market still has doubts about the demand for base metals.

Tin: Three-month LME tin closed up 0.49% at $20,360/mt on last Thursday. The US dollar index rebounded slightly on New Year's Day, with an annual decline of 6.78%, recording the largest annual decline since 2017. The economic prospects improved with the introduction of COVID-19 vaccine, the extremely low interest rate in the US and the ongoing Federal Reserve bond purchase program weakened the attractiveness of the US dollar. Due to the tight supply of refined tin overseas and the expected pressure on the US dollar in the economic stimulus plan, LME tin is expected to run in a relatively strong state in the near term. Pressure above will be seen from $20,500 /mt today. Support below will be seen from $20,000/mt today.

SHFE tin trading will resume today. The guidance brought by LME zinc, spot supply and demand will be monitored. Pressure above will be seen from 155,000 yuan/mt today. The contract is expected to keep fluctuating in the near term.