SMM Morning Comments (Dec 17): LME base metals rose across the board as the US Fed continues to support the economy

SHANGHAI, Dec 17 (SMM) — Nonferrous metals on the SHFE rose for the most part on Thursday morning, holding onto overnight gains, while their counterparts on the LME advanced across the board, as the US Federal Reserve kept benchmark interest rates near zero, as expected, following the conclusion of its two-day meeting.

Shanghai base metals, except for nickel, closed higher in overnight trading. Copper added 0.4%, aluminium advanced 0.7%, zinc edged up 0.05%, lead gained 0.44% and tin firmed 0.81%, while nickel underperformed with a 1.17% loss.

The LME complex fell for the most part on Wednesday. Aluminium edged down 0.05%, zinc shed 0.27%, lead slid 0.63% and nickel fell 1.59%, while copper inched up 0.09% and tin strengthened 1.43%. 

Copper: Three-month LME copper edged up 0.09% to close at $7,814/mt on Wednesday, with open interest decreasing 5,658 lots to 309,000 lots. The most-traded SHFE 2102 copper contract added 0.4% to end at 58,140 yuan/mt in overnight trading.

The Fed said it will buy at least $120 billion of bonds each month “until substantial further progress has been made toward the Committee’s maximum employment and price stability goals,” according to its post-meeting statement. In addition, the US Congress have indicated that they are close to reaching an agreement on a relief bill of less than $900 billion. The dollar index, which measures the greenback against a basket of currencies, was last at 90.23, after sinking as low as 90.419 on Monday, a level not seen since April 2018, which lent support to copper prices.

LME copper is expected to trade between $7,780-7,860/mt today, and SHFE copper between 57,900-58,400 yuan/mt, while spot copper will be traded between discounts of 140 yuan/mt and 70 yuan/mt.

Zinc: Three-month LME zinc shed 0.27% to settle at $2,817/mt on Wednesday, with open interest losing 3,322 lots to 231,000 lots. Zinc stocks across LME-listed warehouses plunged by 1,950 mt or 0.91% to 211,475 mt. The Fed Chairman Powell reiterated that the US economy is facing uncertainties, and this, together with weak retail sales for November, suggested slowed economic recovery from virus-induced recession, which dragged on zinc prices. However, a weak dollar and optimism over US fiscal stimulus package supported zinc prices. LME zinc is expected to fluctuate between $2,800-2,850/mt today.

The most-liquid SHFE 2101 zinc contract inched up 0.05% to close at 21,515 yuan/mt in overnight trading, with open interest decreasing 2,188 lots to 72,589 lots. Zinc concentrate remained in tight supply, but recent environmental inspections and restrictions on electricity consumption are likely to weigh on downstream consumption. The January contract is likely to move between 21,300-21,800 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen slightly lower at 120-150 yuan/mt.

Nickel: The most-active SHFE 2102 nickel contract weakened 1.17% to settle at 129,930 yuan/mt in overnight trading, after earlier hitting a new high in 2020 at 134,180 yuan/mt.

Lead: Three-month LME lead ended 0.63% lower at $2,042/mt on Wednesday.

The most-liquid SHFE 2101 lead contract settled 0.44% higher at 14,710 yuan/mt in overnight trading.

Tin: Three-month LME tin rose 1.43% to end at $19,925/mt on Wednesday, after hitting a new high in 2020 at $19,975/mt earlier in the session. A weak US dollar continued to boost tin prices. The dollar languished near 2-1/2-year lows on Wednesday as progress toward a massive U.S. government spending bill and Covid-19 relief measures whetted risk appetite, sapping demand for the safest assets. Tight supply and a weak US dollar underpinned tin prices. LME tin is likely to fluctuate between $19,400-20,000/mt today.

The most-liquid SHFE 2102 tin contract ended 0.81% higher at 154,490 yuan/mt in overnight trading, after recording a fresh high in 2020 at 155,290 yuan/mt earlier in the session, with open interest increasing 1,298 lots to 34,192 lots. It is expected to move between 150,000-157,000 yuan/mt today.