SMM Morning Comments (Jan 25): Shanghai base metals rose across the board, the LME complex mostly cruised lower

SHANGHAI, Jan 25 (SMM) — Nonferrous metals on the SHFE advanced across the board on Monday morning, and their counterparts on the LME mostly cruised lower after European governments announced further travel restrictions to fight growing Covid infection rates and highly-infectious variants.

Shanghai base metals all closed higher in overnight trading. Copper advanced 0.15%, aluminium added 0.77%, zinc gained 0.3%, lead rose 1.52%, nickel firmed 0.38% and tin climbed 1.4%.

The LME complex ended mostly lower on Friday. Copper edged down 0.6%, nickel weakened 0.98%, aluminium lost 0.28% and tin shed 0.59%, while zinc remained unchanged and lead added 0.59%.

Copper: Three-month LME copper fell 0.6% to end at $7986/mt on last Friday, and is likely to trade between $7,960-8,040/mt today.

The most-active SHFE 2103 copper contract went up 0.56% to close at 59,140 yuan/mt in overnight trading, and it is expected to move between 59,000-59,500 yuan/mt today, while spot premiums will be seen at 70-120 yuan/mt.

The pandemic is getting more and more serious, and the mutation of the strain causes the US to ban most non-American citizens who have been to South Africa recently from entering the country, and France may also enter the country due to a round of blockade. However, the preliminary Markit manufacturing PMI in the US in January announced on Friday night was 59.1, a record high. The recovery of American manufacturing industry exceeded expectations, and the US dollar index declined. The unexpected data boosted investors' optimism, and copper futures rebounded at a low level. On the spot side, as the Spring Festival approaches, it is a foregone conclusion that consumption will weaken. In addition, the market generally expects that a large number of imported refined copper will arrive at port this week, and the low recovery of the supply side will gradually turn to the expectation of accumulating stocks, and the market activity will be further suppressed, and the core of premium will gradually decline.

Aluminium: Three-month LME aluminium fell 0.28% to close at $1,994.5/mt on Friday, with open interest rising to 738,000 lots. It is expected to trade between $1,920-2,030/mt today.

The most-liquid SHFE 2013 aluminium contract rose 0.77% to settle at 15,085 yuan/mt on Friday night, and is likely to trade between 14,500-15,300 yuan/mt today. The overall consumption of aluminium downstream weakened. Recently, the transportation of aluminium ingots has been limited for a short time in the northwest region, and social inventories of aluminum ingots declined. It is expected that the aluminium ingots accumulated last week will arrive in this week, which will lift up social inventories. Aluminium prices were under pressure again. Spot premiums for the contract will be seen higher at 90-120 yuan/mt.

Zinc: Three-month LME zinc fell 0.22% to close at $2,708.5/mt on last Friday. Zinc stocks at LME-listed warehouses fell 425 mt to 191,450 mt. The tightening of pandemic prevention restrictions in the world has caused investors' risk aversion to heat up, and it is difficult for the Democratic Party to push Congress to approve a stimulus plan with a scale of nearly $2 trillion, which has caused LME zinc to fall all the way, while the higher-than-expected US data boosted market confidence. Rhe Federal Reserve's interest rate decision next week will be monitored. The contract is likely to trade between $2,670-2,720/mt today.

The most-liquid SHFE 2102 zinc contract rose 0.3% to end at 20,350 yuan/mt in overnight trading. On the supply side, the shortage of mines continues. On the consumption side, the impact of the recent pandemic on consumption is less than the market expectation. After the prices fell, the downstream enterprises have better willingness to restock before the holiday, which drives the social stocks to continue to decline. It is expected that zinc prices will stop falling and stabilise in the near term. The SHFE zinc contract is expected to move between 20,000-20,500 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen higher at 170-180 yuan/mt.

Nickel: The most-active SHFE 2103 nickel contract rose 0.38% to close at 135,250 yuan/mt on last Friday. Open interests fell 251 lots to 178,000 lots. The contract will test support from 135,000 yuan/mt today. SHFE nickel is expected to trade between 130,000-136,500 yuan/mt and LME nickel is expected to trade between $17,600-18,500/mt this week.

The downstream consumption of stainless steel is better than the expected level in the same period of last year, and the demand support for nickel is ideal. The fundamental performance of nickel is stable, and the comprehensive performance of the domestic refined nickel market is better than that of nickel pig iron, but both delivery and import will supplement the market supply and the tight supply in the early stage will gradually ease. With the price increase of stainless steel, the prices of high nickel pig iron have also improved. In addition, the procurement cycle of new energy industry is advanced, which makes nickel sulphate consumption perform well and raw materials are in short supply. The expected recovery of consumption still make the market think that commodities are in a strong cycle. Biden took over as president, the US adopted positive economic stimulus policies to boost the metal market, and the annual GDP data released by China is also bright. The positove macro environment at present can provide some support for the high nickel price consolidation.

Lead: Three-month LME lead settled 0.59% higher at $2,046/mt on last Friday. Last Friday night, the preliminary Markit Manufacturing PMI in the US in January recorded 59.1, a record high, and the recovery of manufacturing industry exceeded expectations, boosting investor confidence. LME lead inventories fell 1,975 mt to 115,175 mt. The recent continuous destocking boosted the strong upward trend of the contract.

The most-active SHFE 2102 lead contract trended higher on Friday night, ending 1.52% higher at 15,345 yuan/mt. It is expected that battery enterprises on holiday at the end of January and the beginning of February will complete the stockpiling this week, while some secondary lead refineries will gradually stop and clear the stocks to prepare for vacation. After the last round of pre-holiday purchase and stockpiling in the trade market, there will be a tepid market of both supply and demand.

Tin: Three-month LME tin closed down 0.59% at $21,970/mt on last Friday. Last Friday, LME tin inventories continued to drop to 1,020 mt, which have not yet got rid of the downward trend. The shortage of overseas refined tin market supported the high-level operation of LME tin. The contract is expected to fluctuate around $22,000/mt and will test support from $22,000/mt.

The most-liquid SHFE 2103 tin contract rose 1.56% at 165,370 yuan/mt on Friday night. The recent reduction in domestic circulation spot and the release of pre-holiday stockpiling demand have certain support for SHFE tin. Pressure above will be seen from 168,000 yuan/mt today. Support below will be seen from 158,000 yuan/mt today.