SMM Morning Comments (Sep 3): Shanghai base metals were mostly lower as dollar extended gains

SHANGHAI, Sep 3 (SMM) — Shanghai base metals traded lower for the most part on Thursday morning as the dollar held onto overnight gains, while their counterparts on the LME rose across the board as investors await US jobless claims data set to release today.  

China’s services sector sustained recovery in August, an industry survey showed on Thursday, with companies hiring more employees for the first time since January.

The Caixin/Markit services Purchasing Managers' Index (PMI) slipped to 54.0 from 54.1 in July, dipping for the second month after June's decade high, but remaining above the 50-mark that separates monthly growth from contraction.

On the SHFE, nonferrous metals, except for nickel and tin, closed lower in overnight trading. Copper weakened 0.59%, aluminium fell 0.93%, zinc slipped 0.69% and lead declined 0.82%, while nickel added 0.31% and tin rose 0.8%.

The LME complex traded mixed on Wednesday. Nickel rose 1.09%, tin advanced 1.05% and copper edged up 0.07%, while lead shed 1.97%, aluminium fell 1.54% and zinc declined 1.2%.

Copper: Three-month LME copper plunged to an intraday low of $6,636.5/mt before regaining some ground to close 0.07% higher at $6,687.5/mt on Wednesday. It is expected to fluctuate between $6,670-6,730/mt today.

The most-active SHFE 2010 copper contract ended 0.59% lower at 51,880/mt in overnight trading, and is likely to move between 51,800-52,300 yuan/mt today, while spot premiums are seen higher at 60-130 yuan/mt.

An ADP report showed that US private payrolls fell far short of expectations, rising by 428,000 in August, pointing to a slowing labor market recovery. The US dollar index, which measures the greenback against a basket of its peers, extended gains, weighing on base metals. Spot premiums are expected to rise slightly as trades turned active in the spot market as copper prices plummeted.

Zinc: Three-month LME zinc came off an intraday high of $2,574/mt to an intraday low of $2,526.5/mt before reversing some losses to close 1.2% weaker at $2,527/mt on Wednesday. Zinc stocks across LME-listed warehouses inched up 25 mt or 0.01% to 220,150 mt. US private payrolls undershooting expectations and dollar bounce-back raised worries among investors, weighing on LME zinc. It is expected to move between $2,530-2,580/mt today.  

The most-traded SHFE 2010 zinc contract trended lower with its LME countarpat in overnight trading, falling 0.69% to settle at 20,170 yuan/mt, with support from the five- and ten-day moving averages. Trades were muted in the spot market as high zinc prices sidelined buyers, which limited upward space for SHFE zinc, but overseas orders that improved slightly will underpin zinc prices. The October zinc contract is likely to trade between 19,900-20,400 yuan/mt today, while spot premiums for domestic 0# Shuangyan are seen lower at 80-90 yuan/mt over the September contract.   

Nickel: The most-active SHFE 2011 nickel contract edged up 0.31% to close at 122,550 yuan/mt in overnight trading, with open interest increasing 4,078 lots to 169,000 lots. Whether the contract could break above 123,000 yuan/mt will come under scrutiny today.  

Lead: Three-month LME lead came off an intraday high of $1,986/mt to slump to an intraday low of $1,931.5/mt on Wednesday as dollar rebounded, before wiping out some losses to end 1.97% lower at $1,936.5/mt.  

The most-liquid SHFE 2010 lead contract fell 0.82% to close at 15,735 yuan/mt in overnight trading.  

Tin: Three-month LME tin bounced off an intraday low of $18,100/mt to climb to its highest since July 2019 at $18,380/mt on Wednesday, before giving up some gains to settle 1.05% higher at $18,340/mt. Pressure above will be seen at around $18,500/mt today.  

The most-liquid SHFE 2011 tin contract settled 0.8% firmer at 147,190 yuan/mt in overnight trading. Pressure above will be seen at around 148,000 yuan/mt today.