SMM Morning Comments (Sep 9): Shanghai base metals extended overnight losses amid unfavorable macroeconomic environment

SHANGHAI, Sep 9 (SMM) — Shanghai base metals weakened across the board on Wednesday morning, extending overnight losses, and the LME complex also opened lower, as plunged US stocks and oil prices drove up market panic and as Brexit uncertainty boosted US dollar.

Chinese inflation data for August released Wednesday morning showed the producer price index (PPI) declined 2% in August from a year earlier, according to China’s National Bureau of Statistics, while the consumer price index in August rose 2.4% as compared with a year ago.

Shanghai base metals finished in negative territory in overnight trading. Zinc declined 2.54% to lead the losses, copper weakened 1.03%, aluminium edged down 0.28%, lead fell 1.51%, nickel slid 1.72% and tin shed 1.62%.

Their counterparts on the LME performed similarly. Zinc plunged 3.45%, lead fell 2.89%, copper declined 1.21%, aluminium shed 0.14%, nickel weakened 1.78% and tin slid 1.15%. 

Copper: Three-month LME copper closed 1.21% lower at $6,709.5/mt on Tuesday, after hitting an intraday low of $6,640.5/mt earlier in the session. It is expected to move between $6,680-6,760/mt today.

The most-active SHFE 2010 copper contract slid 1.03% to end at 51,980 yuan/mt in overnight trading, and is likely to fluctuate between 51,800-52,300 yuan/mt today, with spot premiums seen higher at 50-120 yuan/mt.  

Overnight, oil prices tumbled to their lowest since June, with West Texas Intermediate crude plunging more than 7% and Brent crude falling more than 5%, weighing on copper futures contracts. Besides, mounting tensions between the US and China also dragged on copper prices. However, LME copper stocks shrank continuously, at one point touching its lowest level since 2015, and this will support copper prices.  

Aluminium: Three-month LME aluminium rebounded from an intraday low of $1,775/mt to close 0.14% weaker at $1,795/mt on Tuesday, and is likely to move between $1,780-1,810/mt today.

The most-liquid SHFE 2010 aluminium contract slipped 0.28% to settle at 14,455 yuan/mt in overnight trading, after recording a new low since the start of this week at 14,310 yuan/mt earlier in the session. The contract is likely to trade between 14,350-14,500 yuan/mt today, while spot premiums are seen at 90 yuan/mt. 

Zinc: Three-month LME zinc slumped 3.45% to close at $2,421/mt on Tuesday, after hitting its lowest in more than two weeks at $2,414.5/mt earlier in the session. LME zinc stocks continued its slight falls, dipping 100 mt or 0.05% to 219,775 mt. Stronger US dollar and plunged oil prices weighed on market sentiment, sending zinc prices lower. LME zinc is expected to move between $2,410-2,460/mt today.   

The most-traded SHFE 2010 zinc contract settled 2.54% lower at 19,350 yuan/mt in overnight trading. In terms of fundamentals, zinc supply increased as recovered profits encouraged smelters to step up production, but optimism over robust demand from infrastructure contraction and tight supply of zinc concentrate will underpin zinc prices. The October contract is likely to trade between 19,200-19,700 yuan/mt today, while spot premiums for domestic 0# Shuangyan are seen higher at 160-190 yuan/mt.  

Nickel: The most-active SHFE 2011 nickel contract plunged to its lowest level in more than two weeks at 115,630 yuan/mt in overnight trading amid a slew of unfavorable news, before reversing some losses to close 1.72% weaker at 117,240 yuan/mt. Support below from the 117,000 yuan/mt mark will be monitored today.  

Lead: Three-month LME lead plunged to its lowest in nearly 20 trading days at $1,902/mt on Tuesday, before regaining some ground to end 2.89% lower at $1,915.5/mt. The Brexit talks and the coronavirus pandemic will come under scrutiny.  

The most-active SHFE 2010 lead contract moved lower with its LME counterpart, falling 1.51% to settle at 15,350 yuan/mt in overnight trading.