SMM Morning Comments (Dec 18): Nonferrous metals on both LME and SHFE rose across the board on US stimulus bets and supportive Fed

SHANGHAI, Dec 18 (SMM) — Base metals on both SHFE and LME increased across the board on Friday morning, holding onto previous gains, as investors expect more US fiscal stimulus and the US Federal Reserve vowed to continue to pour cash into the financial market and keep interest rates close to zero. 

Shanghai base metals, except for lead, closed higher in overnight trading. Copper added 0.69%, aluminium and zinc rose 1.06%, nickel advanced 0.35% and tin gained 0.37%, while lead underperformed with a 0.1% loss. 

The LME complex performed similarly on Thursday. Copper rose 1.6%, aluminium advanced 1.97%, zinc firmed 1.14%, nickel increased 0.69% and tin inched up 0.03%, while lead shed 0.24%. 

Copper: Three-month LME copper rose 1.6% to close at $7,939/mt on Thursday, while the most-traded SHFE 2102 copper contract added 0.69% to end at 58,740 yuan/mt in overnight trading, with open interest increasing 3,792 lots to 116,000 lots.

The number of first-time unemployment-benefits filers in the US totaled 885,000 in the week ending Dec. 12, the most since the week of September 5. The recovery of the labour market continued to slow amid the COVID-19 pandemic. However, congressional negotiators were closing in on a $900 billion COVID-19 aid bill in the United States, according to lawmakers and aides, boosting stock markets across the globe. On Wall Street, the major averages were coming off a record-setting session, which saw all three indexes close at new highs. Meanwhile, the US dollar index fell below 90, recording a new low since April 2018. These boosted copper futures.

LME copper is expected to trade between $7,890-7,970/mt today, and SHFE copper between 58,400-58,900 yuan/mt, while spot copper will be traded between discounts of 90 yuan/mt and 30 yuan/mt.

Zinc: Three-month LME zinc surged to an intraday high of $2,881/mt before paring some gains to end 1.14% higher at $2,849/mt on Thursday, with open interest losing 1,181 lots to 230,000 lots. Zinc stocks across LME-listed warehouses fell by 325 mt or 0.15% to 211,150 mt. Weak US dollar, the Federal Reserve sticking to its current policy guns and hopes for more US stimulus boosted zinc prices. But the unexpected rise in US first-time filings for jobless benefits last week and the continuous spread of Covid-19 limited the upward space for zinc prices. LME zinc is expected to fluctuate between $2,840-2,890/mt today.

The most-liquid SHFE 2101 zinc contract advanced 1.06% to settle at 21,885 yuan/mt in overnight trading, with open interest decreasing 1,661 lots to 75,314 lots. Treatment charges for zinc concentrate remained low, and consumption of die-cast zinc alloy and zinc oxide was strong even in a low season. The January contract is likely to move between 21,500-22,000 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen lower at 90-110 yuan/mt.

Nickel: The most-active SHFE 2102 nickel contract gained 0.35% to settle at 130,320 yuan/mt in overnight trading, with open interest dipping 411 lots to 156,000 lots.

Lead: Three-month LME lead ended 0.24% lower at $2,037/mt on Thursday As global lead oversupply in the first ten months of 2020 was much larger than the same period last year, and as lead stocks across LME-listed warehouses again surged more than 10,000 mt.  The most-liquid SHFE 2101 lead contract dipped 0.1% to close at 14,735 yuan/mt in overnight trading, and is expected to remain weak in the short term amid stable supply and sluggish consumption.

Tin: Three-month LME tin edged up 0.03% to settle at $19,930/mt on Thursday, after recording a new high in 2020 at $20,065/mt earlier in the session. The US dollar index at one point fell by 0.56% to 89.72, setting a new low since April 2018, investors expected more U.S. Stimulus and the Fed committed to pump more cash into the financial market and keep interest rates near zero. 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 gained 0.37% to settle at 155,050 yuan/mt in overnight trading, after recording a fresh high in 2020 at 155,470 yuan/mt earlier in the session, with open interest increasing 1,604 lots to 34,643 lots. It is expected to move between 151,000-157,000 yuan/mt today.