SMM Evening Comments (Oct 26): Shanghai nonferrous metals declined for the most part, aluminium advanced 0.14%

SHANGHAI, Oct 26 (SMM) – SHFE nonferrous metals broadly fell on Monday October 26 as new coronavirus cases surge in the US as well in countries across Europe.

Investor focus on Monday was also likely on the deteriorating coronavirus situation in the West, with the U.S. recently reporting a record-breaking number of new virus cases.

Shanghai nonferrous metals, except for aluminium, traded lower on Monday October 26. Lead dropped 2.01% to lead the losses, copper weakened 0.58%, nickel shed 1.55%, tin declined 1.92%, and zinc fell 1.21%, while aluminium advanced 0.14%.

SMM data showed that social inventories of refined zinc ingots across Shanghai, Tianjin, Guangdong, Jiangsu, Zhejiang, Shandong and Hebei increased 4,600 mt from last Friday October 23 to 165,200 mt as of Monday October 26. The stocks were up 5,400 mt from last Monday October 19.

The ferrous complex also traded lower. Hot-rolled coil fell 0.52%, rebar shed 1.04% and iron ore went down 3.31%.

Copper: The most-traded SHFE 2012 copper contract finished the day 0.58% higher at 51,810 yuan/mt.

Western countries such as Europe and the United States continue to be affected by the pandemic. New cases of COVID-19 in the US hit record highs. At least three assistants and advisers of Vice President Burns were infected with the virus, while the US indicated that it would not control the pandemic in order not to affect economic activities. Italy and Spain tightened anti-pandemic restrictions, and the pandemic situation in Europe became serious again and again, which caused the initial value of comprehensive PMI of the euro zone in October to drop from 50.4 in September to 49.4, slipping into contractionary territory. The bad news in the euro zone caused the US dollar index to rebound to around 93, and the crude oil futures continued to fall, which dampened copper prices to some extent.

The Fifth Plenary Session of the 19th CPC Central Committee was held in Beijing today. The 14th Five-Year Plan, the "Double Cycle" and other issues have attracted much attention. It is expected that there will be some support for domestic copper prices in a period of time. The keynote of the meeting is expected to improve the fundamentals in the fourth quarter, and there may be some room for repair of terms of trade.

News of the Fifth Plenary Session and whether the contract could maintain its upward trend will come under scrutiny tonight.

Aluminium: The most-liquid SHFE 2011 aluminium contract rose to an intraday high of 14,820 yuan/mt after opening and closed up 0.14% at 14,740 yuan/mt. Open interest fell 5,489 lots to 112,000 lots. The contract is likely to continue to fluctuate at high.

Zinc: The most-active SHFE 2012 zinc contract finished the day 1.21% lower at 19,525 yuan/mt. Open interest rose 3,245 lots to 79,095 lots. The contract is expected to move at low tonight and will test support from 40-day moving average.

Nickel: The most-traded SHFE 2012 nickel contract fell to a session low of 117,580 yuan/mt in afternoon trading and closed down 1.55% at 117,880 yuan/mt today. Open interest fell 12,895 lots to 104,875 lots.

Nickel ore prices remained high. After the Philippines enters the rainy season in the fourth quarter, the supply will continue to be tight. Nickel pig iron is supported by raw materials and continues to stalemate with downstream bargaining. The slow recovery of refined nickel demand and continuous sluggish import, leading to the decrease in the domestic supply. The supply will be tight in the later period. The only potential bad news is whether the prices of stainless steel can maintain stable. If the prices of stainless steel fall, the bad news will be transmitted to the nickel industry chain.

The Fifth Plenary Session of China has been held this week, and the US presidential election is about to enter the sprint stage. Whether the US stimulus bill, which is concerned by the financial market, can be reached will become a key factor. The contract is expected to trade between 116,500 – 120,500 yuan/mt this week.

Lead: The most-traded SHFE 2012 lead contract ended the day 2.01% lower at 14,105 yuan/mt. Open interest rose 4,435 lots to 32,337 lots. Fundamental consumption is weak, secondary lead still maintains a deep discount with weak support below. Whether the contract could move above 14,000 yuan/mt will come under scrutiny tonight.

Tin: The most-liquid SHFE 2012 tin contract climbed to an intraday high of 146,380 yuan/mt and ended the day 1.92% lower at 143,270 yuan/mt today. Open interest fell 6,245 lots to 10,695 lots. The stabilization and rebound of the US dollar, combined with the slowdown in supply concerns in the tin market, prompted the contract to start a correction. Pressure below is expected to around 140,000 yuan/mt.