SMM Morning Comments (Aug 20): LME nonferrous metals fell across the board on the Fed’s grim outlook over the economy

SHANGHAI, Aug 20 (SMM) — Nonferrous metals on the LME declined across the board on Thursday morning after the Federal Reserve said in the minutes from its July meeting that “the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term and was posing considerable risks to the economic outlook over the medium term.”

Meanwhile, on the SHFE, base metals rose for the most part as of 10:00 Beijing time on Thursday morning, while precious metals crashed.

On the SHFE, nonferrous metals, except for nickel, cruised higher in overnight trading. Copper rose 1.08%, aluminium added 1.31%, zinc advanced 1.12% and tin and lead firmed 0.56%.

Their counterparts on the LME were mostly higher on Wednesday. Copper advanced 1.38%, aluminium strengthened 1.07%, zinc added 0.79% and lead firmed 0.35%, while nickel slid 0.75% and tin weakened 0.11%.

Copper: Three-month LME copper extended gains on Wednesday, rising to a fresh high of $6,707/mt since this year before erasing some gains to end 1.38% higher at $6,690/mt. LME copper stocks continued to dip. It is expected to move between $6,580-6,660/mt today.

The most-active SHFE 2009 copper contract closed 1.08% firmer at 52,500 yuan/mt in overnight trading. It is likely to trade between 52,100-52,600/mt today, while spot premiums are seen lower at 60-80 yuan/mt.

In the spot market, high copper prices and spot premiums sidelined downstream buyers, but premiums are likely to remain firm as traders raised prices.

Aluminium: Three-month LME aluminium closed 1.07% higher at $1,787.5/mt on Wednesday.  

The most-liquid SHFE 2009 aluminium contract rose 1.31% to end at 14,745/mt in overnight trading. It is expected to move between 14,550-14,750 yuan/mt today, while spot premiums are seen stable at 70-90 yuan/mt.

Zinc: Three-month LME zinc strengthened 0.79% to close at $2,494/mt on Wednesday, after hitting its highest in 2020 at $2,525/mt earlier in the session. LME zinc stocks rose 1,650 mt or 0.73% to 226,400 mt. Encouraging economic data from the eurozone boosted zinc prices, while the dollar gained after the Federal Reserve expressed concerns on the future of the economy. LME zinc is likely to move between $2,470-2,520/mt today.  

The most-traded SHFE 2009 zinc contact settled 1.12% higher at 20,235 yuan/mt in overnight trading. Sustained supportive fiscal policies from the Chinese government, stronger US dollar and the uncertainty over US-China trade relations are likely to keep SHFE zinc fluctuating range-bound in the short term. The September contract is expected to trade between 19,800-20,300 yuan/mt today, while spot premiums for domestic 0# Shuangyan are seen lower at 90-120 yuan/mt.

Nickel: The most-active SHFE 2010 nickel contract ended 0.58% lower at 115,900 yuan/mt in overnight trading. Open interest declined 2,604 lots to 118,000 lots. Support below will be seen at around 115,700 yuan/mt today.  

Lead: Three-month LME lead climbed to a session high of $2,025.5/mt before paring some gains to end 0.35% higher at $2,002/mt on Wednesday. The effect of global widespread of Covid-19 and unstable geopolitics on market sentiment will be monitored.

The most-liquid SHFE 2009 lead contract closed 0.56% higher at 16,245 yuan/mt in overnight trading.

Tin: Three-month LME tin closed 0.11% lower at $17,625/mt on Wednesday after hitting an intraday high of $17,800/mt earlier in the session. It is expected to move between $17,500-17,700/mt today.  

The most-liquid SHFE 2010 tin contract settled 0.56% firmer at 143,360 yuan/mt in overnight trading. Pressure above will be seen at around 144,500 yuan/mt today.