SMM Morning Comments (Nov 25): Shanghai base metals were mostly higher after Dow surges to a new record

Published: Nov 25, 2020 09:40
Nonferrous metals on the SHFE were mostly higher on Wednesday morning, and their counterparts on the LME rose across the board, following a record session on Wall Street as coronavirus vaccine hopes and reduced uncertainty in US politics buoy investor sentiment.

SHANGHAI, Nov 25 (SMM) — Nonferrous metals on the SHFE were mostly higher on Wednesday morning, and their counterparts on the LME rose across the board, following a record session on Wall Street as coronavirus vaccine hopes and reduced uncertainty in US politics buoy investor sentiment.

Positive momentum in the race for a coronavirus vaccine has boosted global markets. Earlier this week, AstraZeneca announced that interim analysis showed its vaccine has an average efficacy of 70% in protecting against the virus.

Uncertainty in US politics has also eased after the Trump administration officially began the transition process to President-elect Joe Biden following weeks of delay.

Shanghai base metals mostly advanced in overnight trading. Nickel rose 1.2% to lead the gains, aluminium advanced 0.92%, copper added 0.92% and tin edged up 0.11%, while zinc and lead underperformed with 0.07% and 0.23% losses respectively.

The LME complex rose across the board on Tuesday. Copper was the best performer with a rise of 1.39%. Lead advanced 0.9%, tin edged up 0.32%, aluminium climbed 0.91%, zinc increased 0.66% and nickel went up 1.15%.

Copper: Three-month LME copper rose 1.39% to end at $7,309/mt on Tuesday, and is likely to trade between $7,270-7,350/mt today.

The most-active SHFE 2101 copper contract went up 0.92% to close at 54,690 yuan/mt in overnight trading, and it is expected to move between 54,400-54,900 yuan/mt today, while spot premiums will be seen at 110-170 yuan/mt.

US President-designate Biden announced the foreign policy and national security team. With the handover of presidential power and the positive vaccine news, US stocks surged overnight. The Dow Jones index broke 30,000 for the first time in history, and the S&P 500 index reached a record high. The US index continued to fall at night, with copper futures showing a strong performance, hitting a 30-month high. Initial jobless claims in the US as of November 21 and the revised annualised rate of US Real GDP for the third quarter will be released today, focusing on the impact of today's economic data on the market. On the spot side, the absolute price remained high. The commodity holder wanted to trade at a high level and increase the discount slightly. In addition, it is reported that a small inflow of imported copper will also have a certain impact on the increase in the discount rate. Continue to pay attention to the import inflow and inventory data, and whether the import inflow can continue to break the long-term pattern of high premium.

Aluminium: Three-month LME aluminium rose 0.91% to close at $1,985.5/mt on Tuesday, with open interest rising to 727,000 lots. The pressure at $2000/mt will be monitored in the near term. It is expected to trade between $1,960-2,000/mt today.    

The most-liquid SHFE 2012 aluminium contract went up 0.92% to settle at 15,945 yuan/mt on Tuesday night, and is likely to trade between 15,800-16,200 yuan/mt today. Spot high premium supports November contract prices.

Zinc: Three-month LME zinc rose 0.66% to close at $2,750/mt on Tuesday. Zinc stocks at LME-listed warehouses fell 400 mt to 222,575 mt. US Dollar weakened overnight, and US stocks rose collectively, supporting LME Zinc. Although a new wave of COVID-19 infections has caused a sharp increase in hospital admissions and deaths and has hit the global economy hard, the news of the COVID-19 vaccine and the start of a formal power transfer process by US President-elect Biden have boosted bullish sentiment. The contract is likely to trade between $2,730-2,780/mt today.

The most-liquid SHFE 2101 zinc contract fell 0.07% to end at 20,905 yuan/mt in overnight trading. After the environmental protection and production limitation in the heating season in the downstream of North China and the significant increase in zinc prices, the downstream purchasing demand decreased and the marginal demand for zinc weakened. However, some smelters planned to turn into maintenance and reduce production materials to provide upward momentum for SHFE zinc. The SHFE zinc contract is expected to move between 20,700-21,200 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen higher at 140-150 yuan/mt.

Nickel: The most-active SHFE 2102 nickel contract rose 1.2% to close at 120,950 yuan/mt on Tuesday. Open interests fell 662 lots to 162,000 lots. Pressure above will be seen from 121,000 yuan/mt today. Whether the contract could remain above 120,000 yuan/mt will be monitored today.

Lead: Three-month LME lead settled 0.9% higher at $2,020/mt on Tuesday. The impact of the increase of COVID-19 infection cases in overseas economies and the effect of new vaccination on the prices of basic metals in the future will be monitored.

The most-active SHFE 2101 lead contract trended lower on Tuesday night, ending 0.23% lower at 15,285 yuan/mt. It is still necessary to pay attention to the weak consumption sentiment in the downstream and the pressure on the upward lead prices brought by the gradual resumption of production in the secondary lead smelters.

Tin: Three-month LME tin closed up 0.32% at $18,660/mt on Tuesday. Overnight, LME tin recorded a slight increase supported by the downward trend of the US dollar, and maintained a volatile trend as a whole, trading between five- and 10-day moving average. The US dollar fell 0.44% as risk appetite improved after US President Trump agreed to hand over with President-elect Biden and the market was optimistic about the upcoming launch of the COVID-19 vaccine. LME tin is expected to keep fluctuating in the near term. Pressure above will be seen from $188,000 /mt today. Support below will be seen from $185,000/mt today.

The most-liquid SHFE 2101 tin contract rose 1.2% at 146,300 yuan/mt on Tuesday night. The contract is expected to keep fluctuating in the near term. Pressure above will be seen from 147,500 yuan/mt today. Support below will be seen from 145,500 yuan/mt today.

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

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