SMM Morning Comments (Nov 30): Shanghai base metals increased across the board China’s manufacturing activities continued to expand in November

Published: Nov 30, 2020 10:15
Shanghai base metals and their counterparts on the LME all cruised higher on Monday morning, holding onto their last Friday gains.

SHANGHAI, Nov (SMM) — Shanghai base metals and their counterparts on the LME all cruised higher on Monday morning, holding onto their last Friday gains.  

China’s National Bureau of Statistics announced Monday that the official manufacturing PMI for November stood at 52.1. It represented the ninth straight month of expansion for Chinese manufacturing recovery as the country continues to see a strong bounce from the coronavirus pandemic.

Shanghai base metals rose across the board on last Friday night. Lead, the best performer, jumped 2.16% to lead the gains, zinc rose 2.08%, copper advanced 1.13%, aluminium increased 1.12%, nickel firmed 0.94% and tin added 0.29%.

The LME complex performed similarly on Friday. Lead surged 3.13% to lead the gains, copper advanced 1.26%, aluminium increased 1.65%, zinc added 1.09%, nickel rose 0.8% and tin firmed 0.72%.

Copper: Three-month LME copper settled 1.26% higher at $7,505.5/mt on Friday, with open interest reaching 313,000 lots, and it is likely to trade between $7,470-7,550/mt today.  

The most-active SHFE 2101 copper contract fluctuated around the daily moving average on last Friday night before ending 1.13% higher at 56,240 yuan/mt. It is likely to move between 56,000-56,500 yuan/mt today, with spot premiums to at 120-170 yuan/mt.  

The year-on-year increase in profits of large Chinese enterprises registered a new high in nearly four years in October, and this, combined with positive coronavirus vaccine progress and increased hopes for a smooth US presidential power transition, boosted risk appetite.  

Nickel: The most-active SHFE 2102 nickel contract added 0.94% to end at 122,750 yuan/mt on last Friday night, with open interest decreasing 1,731 lots to 181,000 lots. Although overseas employment data were disappointing due to the resurgence of Covid-19, investors were bullish on the market in the future. And this, together with a slew of positive vaccine news, boosted nickel prices. Weak #300 stainless steel prices had weighed on nickel-related products prices, but market sentiment improved after both stainless steel mills and NPI plants planned to cut output. In addition, refined nickel inventories in China shrank to its lowest level in 2020 amid stable consumption and fewer imports. SMM will monitor the support from the 123,000 yuan/mt mark for the SHFE nickel contract today.

Zinc: Three-month LME zinc increased to its highest level in 2020 of $2,810/mt on last Friday on a weakened US dollar before relinquishing some gains to settle 1.09% firmer at 2,808.5/mt, generating a four-day winning streak. Zinc stocks across LME-listed warehouses shrank 550 mt or 0.25% to 221,325 mt. A slew of positive coronavirus vaccine news and optimism over a rapid vaccine-fuelled US economic recovery and smooth power transition from the Trump Administration to the Biden team significantly boosted market sentiment. LME zinc is expected to trade between $2,770-2,820/mt today.

The most-traded SHFE 2101 zinc contract climbed 2.08% to close at 21,370 yuan/mt on last Friday night, with open interest rising 7,486 lots to 112,321 lots. Strong Chinese economic data, tight zinc concentrate supply and a slight drop in domestic zinc inventories boosted zinc prices. The most-active SHFE zinc contract is likely to move between 210,000-215,000 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen at 140-150 yuan/mt against the December contract.  

Lead: Three-month LME lead surged to its highest level in 2020 at $2,113.5/mt on last Friday before giving up some gains to close 3.13% higher at $2,107/mt, posting a four-day winning streak. A weak US dollar was supportive to lead prices.  

The most-active SHFE 2101 lead contract jumped 2.16% to settle at 15,630 yuan/mt on last Friday night, after hitting an almost three-month high at 15,670 yuan/mt earlier in the session. The contract is expected to fluctuate in large range-bound this week considering stronger LME lead and tepid consumption in domestic spot lead markets.  

Tin: Three-month LME tin rose to a more than one-week high of $19,125/mt on last Friday before paring some gains to end 0.72% higher at $18,975/mt. The US dollar index fell to its lowest level in almost three months on Friday as strong economic data from China favoured commodity currencies over safe havens, which underpinned tin prices. LME tin is expected to move between $18,500-19,000/mt today.

The most-liquid SHFE 2101 tin contract ended 0.29% firmer at 147,930 yuan/mt on last Friday night, with open interest decreasing 1,127 lots to 10,991 lots. It is likely to trade between 145,500-150,000 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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