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SMM Morning Comments (Sep 1): Shanghai base metals rose broadly on weak dollar, upbeat China’s Caixin/Markit manufacturing PMI
Sep 1,2020 10:09CST
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Source:SMM
Shanghai base metals, except for aluminium, opened on a positive note on Tuesday morning, holding onto overnight gains, while their counterparts on the LME increased across the board, as the dollar hit two-year low on the back of the US Federal Reserve’s policy shift on inflation.  

SHANGHAI, Sep 1 (SMM) — Shanghai base metals, except for aluminium, opened on a positive note on Tuesday morning, holding onto overnight gains, while their counterparts on the LME increased across the board, as the dollar hit two-year low on the back of the US Federal Reserve’s policy shift on inflation.  

 

Results of a private survey on Tuesday showed China’s manufacturing activity expanded in August at the fastest pace in nearly a decade. The Caixin/Markit manufacturing Purchasing Managers’ Index (PMI) came in at 53.1 for August, compared to 52.8 in July.

On Monday, China’s official manufacturing PMI for August came in at 51.0, according to the country’s National Bureau of Statistics.

 

On the SHFE, nonferrous metals, except for aluminium, finished in positive territory in overnight trading. Lead rose 0.89% to lead the gains, copper added 0.81%, zinc advanced 0.35%, nickel edged 0.08% higher and tin firmed 0.59%, while aluminium underperformed with a 0.21% loss.

 

The LME market was closed on Monday for a summer bank holiday and will resume normal trading on Tuesday September 1.

 

Copper: The most-traded SHFE 2010 copper contract settled 0.81% higher at 52,410 yuan/mt in overnight trading. The US dollar index, which tracks the greenback against a basket of its peers, fell below 92 to its lowest in 27 months amid a slew of economic stimulus measures issued by the Federal Reserve, providing traction to copper prices. In addition, China’s manufacturing PMI for August stood above 50 for six consecutive months, suggesting a continued recovery of the economy. Trades are likely to be active on the first trading day of September, but tepid domestic demand and rising inventories will keep spot premiums relatively stable at 20-80 yuan/mt. LME copper is expected to trade between $6,700-6,750/mt today, while its SHFE counterpart between 52,200-52,600 yuan/mt.   

 

Aluminium: The most-active SHFE 2010 aluminium contract fell 0.21% to close at 14,565 yuan/mt in overnight trading. It is expected to move between 14,450-14,650 yuan/mt today, while spot premiums are seen at 0-40 yuan/mt.  

 

Zinc: Expectations of the US Federal Reserve’s yield curve control (YCC) and the coronavirus-related relief bill are likely to provide traction to zinc prices. LME zinc is expected to move between $2,510-2,560/mt today.

The most-traded SHFE 2010 zinc contract rose 0.35% to close at 20,050 yuan/mt in overnight trading. Zinc prices increased on the backdrop of the weak US dollar and upbeat China’s official manufacturing Purchasing Managers’ Index (PMI) for August. The effect of environmental protection and changes in inventories will be monitored in the near term. The October zinc contract is likely to trade between 19,800-20,300 yuan/mt today, while spot premiums for domestic 0# Shuangyan are seen at stable at 90-100 yuan/mt against the September contract.   

 

Nickel: The most-liquid SHFE 2011 nickel contract edged 0.08% higher at 120,960 yuan/mt in overnight trading, with open interest falling 2,968 lots to 154,000 lots. Whether the contract could break above 121,550 yuan/mt will be monitored today.  

 

Lead: The most-active SHFE 2010 lead contract trended higher in overnight trading, ending 0.89% firmer at 15,810 yuan/mt. The effect of downstream demand on lead prices will come under scrutiny.  

 

Tin: The most-active SHFE 2011 tin contract rebounded from a session low of 144,620 yuan/mt to a session high of 145,630 yuan/mt in overnight trading, before paring some gains to end 0.59% firmer at 145,560 yuan/mt. Pressure above will be seen from 146,000 yuan/mt today.

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