SMM Evening Comments (Dec 17): Shanghai nonferrous metals closed mostly higher, nickel fell 0.78%

SHANGHAI, Dec 17 (SMM) – SHFE nonferrous metals rose for the most part on Thursday December 17 as investors reacted to the latest announcements from the US Federal Reserve.

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. The U.S. central bank also kept benchmark interest rates near zero, as expected, following the conclusion of its two-day meeting.

Federal Reserve Chairman Jerome Powell also said on Wednesday that stock prices are not necessarily highly priced given how low interest rates are.

Zinc, the best performer, rose 2.05%, aluminium advanced 1.19%, lead went up 1.02%, copper climbed 1.42% and tin gained 0.89%, while nickel dropped 0.78%.

The ferrous complex rose across the board. Iron ore surged 2.6%, rebar rose 1.73%, and hot-rolled coil climbed 1.14%.

Copper: The most-traded SHFE 2102 copper contract finished the day 1.42% higher at 58,730 yuan/mt. Open interest rose 11,536 lots to 112,000 lots.

The Federal Reserve said it would keep its monetary policy and bond purchase plan unchanged until it made substantial progress in employment and inflation. Congressional leaders are reported to be close to reaching an agreement on a bail-out bill of less than $900 billion. On the whole, while the European and American policies are still weak, the monetary is expected to keep loose until next year, and investors have still showed good expectations on the capital market. In addition, the US dollar index kept dropping, once falling below 90, which obviously supported the rise of copper prices.

Bank of England will announce its interest rate decision on Thursday. The trend of LME copper, the US dollar index and whether the contract could remain above 58,000 yuan/mt and move above 59,000 yuan/mt will come under scrutiny tonight.

Aluminium: The most-liquid SHFE 2101 aluminium contract finished the day 1.19% higher at 16,515 yuan/mt. Open interest rose 3,503 lots to 116,477 lots. Social inventories of primary aluminium ingots across eight consumption areas in China, including SHFE warrants, decreased 7,000 mt from last Thursday to 589,000 mt as of December 17.

Zinc: The most-active SHFE 2101 zinc contract closed up 2.05% at 21,440 yuan/mt. Open interest fell 2,198 lots to 77,000 lots. The overseas stimulus bill was positive, and the US dollar maintained a downward trend, prompting the contract to trade robustly. However, on the fundamentals, high prices inhibited the restocking demand of downstream enterprises. Premium across the three major trading hubs (Shanghai, Tianjin and Guangdong) performed weak, and the consumption of galvanized plate weakened at the end of the year, which was likely to restrict the upward space of zinc prices. Whether the contract could move above 22,000 yuan/mt will be monitored tonight.

Nickel: The most-traded SHFE 2102 nickel contract ended the day 0.78% lower at 130,450 yuan/mt today. Open interest fell 3,265 lots to 156,328 lots.

Lead: The most-traded SHFE 2101 lead contract rose to an intraday high of 14,860 yuan/mt after opening and ended the day 1.02% higher at 14,795 yuan/mt. Open interest fell 1,495 lots to 31,923 lots. Downstream consumption continued to improve, and the US dollar index kept falling. The strong trend of LME Lead is likely to boost bullish sentiment. Long positions are likely to move above 10-day moving average of 14,870 yuan/mt tonight.

Tin: The most-liquid SHFE 2102 tin contract fell to a session low of 152,900 yuan/mt and finished the day 0.73% higher at 154,610 yuan/mt today. Open interest rose 1,145 lots to 34,039 lots. With the support of positive macroeconomic data and tight fundamentals of tin market, the contract is likely to trade robustly in the near term. Pressure above will be seen from 157,000 yuan/mt today. Support below will be seen from 150,000 yuan/mt today.