SMM Morning Comments (Nov 16): Shanghai base metals were mostly higher as a giant trade deal were signed

SHANGHAI, Nov 16 (SMM) — Nonferrous metals on the SHFE were mostly higher on Monday morning, and their counterparts on the LME rose across the board, as 15 economies in Asia signed a deal that formed the world's largest trade alliance.

The trade deal, signed on Sunday, aims to gradually reduce tariffs across many areas. The Regional Comprehensive Economic Partnership is now the world’s largest trade bloc, a deal that excludes the U.S. It marks the first time that East Asian powers China, Japan and South Korea are in a single trade agreement.

Shanghai base metals mostly advanced in overnight trading. Copper rose 0.88% to lead the gains, zinc advanced 0.43%, nickel added 0.01% and tin edged up 0.18%, while aluminium and lead underperformed with 0.26% and 0.31% losses respectively.

The LME complex rose across the board on Friday. Lead was the best performer with a rise of 1.22%. Copper advanced 1.21%, tin edged up 1.01%, aluminium climbed 0.36%, zinc increased 0.61% and nickel went up 0.28%.

Copper: Three-month LME copper added 1.21% to end at $7,000/mt on Friday, and is likely to trade between $6,960-7,040/mt today.

The most-active SHFE 2012 copper contract advanced 0.54% to close at 52,460 yuan/mt in overnight trading, and it is expected to move between 52,200-52,700 yuan/mt today, while spot premiums will be seen at 140-200 yuan/mt.

At night, the US dollar index showed a correction, and risk appetite boosted the three major stock indexes of US stocks to close up collectively, reaching a record high. Macroscopically, China's manufacturing industry has recovered steadily, and the manufacturing industry of major economies in the world has also continued to recover. In addition, Biden will be elected president of the US, and the uncertain factors have been reduced to some extent, which partly supported copper. However, the new cases of COVID-19 are still surging, and the interference of the pandemic on economic recovery is still the biggest uncertainty at present. Whether China's heavy economic data released in October can give the contract sustained upward momentum will be monitored today. On the spot side, the monthly delivery is about to replace, and the premium in the market dominated by traders obviously rises. After the monthly delivery is completed, the changing trend of actual inventories and whether the repair of import loss can give some guidance to the high premium will be monitored.

Aluminium: Three-month LME aluminium rose 0.36% to close at $1,934.5/mt on Friday, with open interest rising to 750,000 lots. It is expected to trade between $1,910-1,950/mt today. 

The most-liquid SHFE 2012 aluminium contract slid 0.84% to settle at 15,400 yuan/mt on Friday night, and is likely to trade between 15,200-15,600 yuan/mt today.

Zinc: Three-month LME zinc rose 0.61% to close at $2,640/mt on Friday. Zinc stocks at LME-listed warehouses fell 25 mt to 221,050 mt. The weakness of the US dollar supported nonferrous metals. Boosted by the expectation of the introduction of new fiscal stimulus policies and the good news of vaccines, the market optimism warmed up. However, the continuous fermentation of overseas pandemics suppressed the upward space of LME zinc.The development of vaccines and pandemics will be monitored in the near term. It is likely to trade between $2,600-2,650/mt today.

The most-liquid SHFE 2012 zinc contract added 0.43% to end at 20,040 yuan/mt in overnight trading. Fundamentally, the continuous downward adjustment of TC indicates that the supply at the mine end is tight, but it has not been transmitted to the smelters. The smelting end still maintains high output with the increase in social inventories, the support at the consumer end is insufficient, and the zinc prices are expected to fluctuate weakly in the near term. The December zinc contract is expected to move between 19,800-20,300 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen higher at 170-180 yuan/mt.

Nickel: The most-active SHFE 2102 nickel contract rose 0.01% to close at 119,130 yuan/mt on Friday. Open interests fell 3,623 lots to 145,000 lots. Whether the contract could remain above 119,000 yuan/mt will come under scrutiny today.

On fundamentals, the weakness of 300 series stainless steel affects the product prices of nickel industry chain. The weak atmosphere may continue, but the negative range is limited when the stainless steel output remains high. In addition, the domestic supply of refined nickel is still tight, and the trend of stock reduction continues. On the whole, the fundamentals lay a high fluctuation pattern of nickel prices. In addition, it is necessary to pay more attention to the macro impact. For example, the update progress likely to be made in the COVID-19 vaccine in the week will support the metals. It is expected that the nickel prices will continue to fluctuate at high in the near term. The space below is limited but the upward exploration power is even more lacking, which is mainly driven by macro and capital. Shanghai nickel is expected to trade between 116,000-121,000 yuan/mt and LME nickel is expected to trade between $15,400-16,100 /mt this week.

Lead: Three-month LME lead rose to an intraday high at $1,915/mt before repairing some gains to settle 1.22% higher at $1,906.5/mt on Friday. LME lead rosed for four consecutive years, the US dollar index fell, and the risk aversion still existed. The suppression of lead prices by the strengthening of the US dollar in the following weeks should be monitored.

The most-active SHFE 2012 lead contract trended lwoer on Friday night, ending 0.31% lower at 14,690 yuan/mt. The rising momentum of lead prices is still limited by factors such as smelters and the gradual resumption of production of secondary lead. The general increase of overseas metals will boost SHFE lead to a certain extent. The contract is expected to keep fluctuating in the near term.

Tin: Three-month LME tin closed up 1.01% at an intraday high of $18,425/mt on Friday. Although the number of COVID-19 cases continues to increase, the rebound in risk appetite has boosted the US stock market to crack down on US Treasury bonds. At present, the declining of the US dollar is expected to support the trend of LME tin. Pressure above will be seen from $18,500/mt today. Support below will be seen from 180,000 yuan/mt today. The contract is expected to fluctuate robustly today.

The most-liquid SHFE 2101 tin contract closed down 0.12% at 146,260 yuan/mt on Friday night. SHFE tin is expected to fluctuate today. Support below will be seen from 145,000 yuan/mt today. Pressure above will be seen from 147,000 yuan/mt today.