SMM Evening Comments (Oct 21): Shanghai nonferrous metals closed mostly higher, aluminium fell 0.34%

SHANGHAI, Oct 21 (SMM) – SHFE nonferrous metals rose for the most part on Wednesday October 21 as investors continued to watch stimulus talks.

Zinc, the best performer, rose 2.28%, nickel advanced 1.8%, copper went up 1.61% and lead gained 0.95%, while tin edged down 0.16% and aluminium dropped 0.34%.

Some 5,980 mt of copper scrap imports received the green light in the 13th batch of approvals for restricted solid scrap imports, which was released by China Solid Waste and Chemicals Management.

The ferrous complex also traded higher. Iron ore increased 1.4%, rebar rose 0.88%, and hot-rolled coil climbed 1.18%.

Copper: The most-traded SHFE 2012 copper contract finished the day 1.61% higher at 52,250 yuan/mt. The Democratic Party of the US and the White House are moving closer to reaching a stimulus agreement, and the scale of the White House proposal has increased to 1.88 trillion US dollars. In addition, the number of new housing starts in the US increased in September, and the number of single-family housing starts increased significantly. The European central bank governor said that the rebound of the COVID-19 poses a clear risk to the economic prospects. This statement implies that policy makers will step up to take more monetary stimulus measures, and the risk aversion has dropped significantly. The US dollar has continued to fall, falling below 93 to around 92.7, and global risk assets have closed up across the board. The data of GDP and LPR in China are relatively stable. Whether the contract could follow its counterpart will come under scrutiny tonight.

Aluminium: The most-liquid SHFE 2011 aluminium contract rose to an intraday high of 14,820 yuan/mt and closed down 0.34% at 14,720 yuan/mt. Open interest fell 6,320 lots to 121,395 lots. Change of open interests and the flow of funds will be monitored in the following weeks.

Zinc: The most-active SHFE 2011 zinc contract traded around 19,750 yuan/mt and finished the day 2.28% higher at 19,780 yuan/mt. Open interest rose 1,745 lots to 72,650 lots. The US stimulus plan is close to reach and Europe intends to continue to release liquidity. Inflation expectations have caused commodities to rise, and the fundamental zinc ore supply have tightened expectations in the fourth quarter. The contract is expected to trade robustly.

Nickel: The most-traded SHFE 2012 nickel contract closed up 1.8% at 121,730 yuan/mt today. Open interest rose 14,563 lots to 147,809 lots. Whether the contract could remain above 12,000 yuan/mt will come under scrutiny tonight.

Lead: The most-traded SHFE 2012 lead contract fluctuated around 14,360 yuan/mt in morning trading and ended the day 0.95% higher at 14,395 yuan/mt. Open interest rose 2,138 lots to 25,331 lots. The decline in the US dollar index boosted LME metal, which is likely to support SHFE lead. However, considering the expansion of the fundamental secondary lead premium with weak downstream procurement demand, the contract has insufficient upward momentum. It is expected that the contract will fluctuate at a low level in the near term. Whether the contract could move above 14,400 yuan/mt will come under scrutiny.

Tin: The most-liquid SHFE 2012 tin contract fell to a session low of 147,090 yuan/mt and ended the day 0.16% lower at 147,130 yuan/mt today. Open interest fell 277 lots to 26,498 lots. The upward room of the contract is limited due to sluggish domestic consumption, and it is expected that it will keep fluctuating in the near term. Pressure below is expected to around 146,000 yuan/mt. Pressure above is expected to around 148,500 yuan/mt.