SMM Morning Comments (Mar 8): Shanghai base metals were mostly higher in ‘fragile’ market environment

SHANGHAI, Mar 8 (SMM) — Shanghai base metals were mostly higher on Monday morning as investors reacted to last week's US jobs report that trounced expectations and fueled hopes for a faster economic recovery. Meanwhile, their counterparts on the LME rose across the board.

Shanghai base metals mostly advanced in overnight trading. Copper added 1.31%, tin rose 1.57%, aluminium went up 0.32%, zinc increased 1.14% and nickel strengthened 1.44%, while lead slid 1.36%.

The LME complex all closed higher on Friday. Copper rose 4.52%, aluminium increased 2.54%, zinc went up 2.06%, lead added 0.25%, nickel jumped 3.02% and tin gained 3.22%.

Copper: Three-month LME copper rose 4.52% to end at $8,977/mt on last Friday, and is likely to trade between $8,940-9,020/mt today.

The most-active SHFE 2104 copper contract went up 0.61% to close at 66,320 yuan/mt in overnight trading, and it is expected to move between 66,100-66,700 yuan/mt today, while spot prices will be seen at premiums 60 – discounts 50 yuan/mt.

Last Friday night, US nonfarm data for February was released, and the employment population increased by 379,000. The nonfarm data far exceeded expectations, which boosted the prospects of economic recovery. The market hoped that Biden would launch a 1.9 trillion stimulus plan, and investors' confidence in sustained economic recovery helped keep copper futures at a high level. On the other hand, inflation expectations and strong nonfarm data have further provided momentum for the dollar to rise. On Friday, the US dollar index rose to a three-and-a-half-month high, hitting around 92.20 in intraday trading, which put some pressure on copper conracts to keep rising. On the spot side, traders are still leading the trading in the market. This week, they will enter the delivery cycle and the centralized trading period of transactions under long-term contracts. Traders still have a certain willingness to receive goods in the state of low discount. The spot market is expected to stop falling and rebound, or will gradually return to the pattern of a slight premium.

Aluminium: Three-month LME aluminium rose 2.54% to close at $2,184/mt on Friday, with open interest falling to 707,000 lots. It is expected to trade between $2,150-2,250/mt today.

The most-liquid SHFE 2014 aluminium contract rose 0.23% to settle at 17,285 yuan/mt on Friday night, and is likely to fluctuate between 17,200-17,500 yuan/mt today.

Zinc: Three-month LME zinc rose 2.06% to close at $2,771/mt on last Friday. Zinc stocks at LME-listed warehouses fell 325 mt to 268,775 mt. Last Friday, the market panic caused by the soaring US debt eased, and the nonferrous metals stopped falling to a certain extent. On the weekend, the US Senate passed Biden's $1.9 trillion stimulus bill, which determined the expectation of future US dollar water release, which will boost the prices of LME zinc. The implementation of the US stimulus bill will be monitored in the near term. The contract is likely to trade between $2,760-2,810/mt today.

The most-liquid SHFE 2104 zinc contract rose 1.14% to end at 21,280 yuan/mt in overnight trading. Last week, with the gradual recovery of downstream consumption, the domestic social stocks of zinc ingots took the lead in decreasing, which formed a strong support for zinc prices. Meanwhile, in March, the supply of domestic zinc ore was tight, and the TCs maintained a downward trend, which will also boost ShFE zinc. The contract will trade strongly in the near term. The SHFE zinc contract is expected to move between 21,200-21,700 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen higher at 50-80 yuan/mt.

Nickel: The most-active SHFE 2104 nickel contract rose 1.44% to close at 123,510 yuan/mt on last Friday. Open interests fell 3,574 lots to 80,000 lots. Whether the contact could remain above 125,000 yuan/mt will be monitored today.

SHFE nickel is expected to trade between 117,000-128,000 yuan/mt this week. LME nickel is expected to trade between $15,700-17,000/mt this week.

Lead: Three-month LME lead settled 0.25% higher at $2,005/mt on last Friday. US employment data improved slightly, the market generally expressed disappointment with Powell's speech, as it did not show its intention to curb the long-term rise in the yield of US bonds. This made the trend of base metals unclear, and the bulls carefully covered their positions in this round of fallback, but the driving force for pullback was slightly insufficient. Whether the long positions of LME Lead will continue to exert their strength to stand firm at $2,000/mt will be monitored today.

The most-active SHFE 2104 lead contract trended lower on Friday night, ending 1.36% lower at 14,845 yuan/mt. Whether the contract will meet the opportunity of bottoming out after the two sessions will be monitored this week.

Tin: Three-month LME tin closed up 3.22% at $24,190/mt on last Friday. The US dollar index continued to surge on Friday, hitting a high of 92.201, a five-month high. Due to stronger-than-expected US employment data, investors' confidence in economic recovery has been enhanced. Nondarm jobs surged by 379,000 last month after increasing by 166,000 in January. Recently, the continuous rise of the US dollar may have a certain inhibitory effect on the trend of LME tin. The market reaction to the soaring US debt should be monitored. It is expected that the contract will keep fluctuating. Pressure above will be seen from $25,000/mt today. Support below will be seen from $23,000/mt today.

The most-liquid SHFE 2104 tin contract rose 2.03% at 176,720 yuan/mt on Friday night. The guidance of the LME tin on the trend of SHFE tin should be monitored in the near term. Pressure above will be seen from 180,000 yuan/mt today. Support below will be seen from 170,000 yuan/mt today.