SMM Evening Comments (Dec 18): Shanghai nonferrous metals rose across the board as investors reacted to Brexit and US fiscal stimulus talks

SHANGHAI, Dec 18 (SMM) – SHFE nonferrous metals closed higher across the board on Friday December 18.

“The bigger picture here is that the market is getting hopeful for some resolution of Brexit and (US) fiscal stimulus talks,” said Bank of Singapore currency analyst Moh Siong Sim.

Even soft US economic data, rather than driving a safety bid for dollars, is increasing investors’ expectations for a government spending package, Sim said, which would lift consumption and risk appetite and weigh on the greenback.

Aluminium was the best performer with a rise of 1.91%. Copper advanced 1.75%, lead edged up 1.53%, tin climbed 0.17%, zinc increased 1.36% and nickel went up 1.28%.

The ferrous complex rose across the board. Iron ore surged 6.23%, rebar rose 3.68%, and hot-rolled coil climbed 4.02%.

Copper: The most-traded SHFE 2102 copper contract finished the day 1.75% higher at 59,360 yuan/mt. Open interest rose 5,996 lots to 118,000 lots.

Congressional leaders and their aides continue to finalize the details of the nearly $900 billion COVID-19 rescue plan, and the White House believes that a stimulus agreement is expected to be reached within 48 hours. Senate Majority Leader McConnell also said that the agreement seems to be close at hand. Nearly half a year-long negotiations on the stimulus agreement are about to be settled. In addition, Bank of England maintains quantitative easing and extends its support to enterprises to help the economy tide over the crisis. The People's Bank of China (PBOC) emphasizes that it can speed up or slow down the bond purchase when necessary. The continuous monetary easing policies in Europe and the US have obviously boosted investor confidence in the capital market. The US dollar index continued to decline, once falling to around 89.7, which significantly supported low copper prices.

The progress of stimulus bill, US current account for Q3 and whether the contract could move above 60,000 yuan/mt will come under scrutiny tonight.

Aluminium: The most-liquid SHFE 2101 aluminium contract finished the day 1.91% higher at 16,780 yuan/mt. Open interest fell 2,601 lots to 113,876 lots.

Zinc: The most-active SHFE 2102 zinc contract rose to an intraday high of 22,060 yuan/mt and closed up 1.48% at 21,930 yuan/mt. Open interest rose 12,157 lots to 78,500 lots. The US stimulus bill is said to be passed within 48 hours, causing the US dollar to maintain a downward trend, and the resurgence of inflation sentiment pushed zinc prices to break through the previous high position. However, the overall production in North China weakened due to the weakening orders and limited supply of natural gas. Combined with high prices affecting downstream demand and further weakened market premium, zinc prices are likely to be under pressure. Whether the contract could remain above 22,000 yuan/mt will be monitored tonight.

Nickel: The most-traded SHFE 2102 nickel contract ended the day 1.28% higher at 131,530 yuan/mt today. Open interest fell 8,244 lots to 148,084 lots. Inventories of refined nickel in the Shanghai bonded areas decreased 800 mt from a week ago and stood at 22,000 mt as of December 18, showed SMM data.

Lead: The most-traded SHFE 2101 lead contract rose to an intraday high of 15,010 yuan/mt and ended the day 1.45% higher at 14,975 yuan/mt. Open interest fell 482 lots to 26,221 lots. LME lead declined rapidly with the expansion of primary lead premium on the fundamentals, which was likely to suppress the bullish sentiment to some extent. However, considering that the most-traded contract is changed for the month, and electricity consumption restrictions in South China have given certain support to nonferrous metals, the contract is likely to be under pressure from 15,000 yuan/mt for consolidation tonight.

Tin: The most-liquid SHFE 2101 tin contract climbed to a session high of 155,470 yuan/mt and finished the day 0.17% higher at 154,750 yuan/mt today. Open interest fell 661 lots to 33,378 lots. Pressure above is expected to around 157,000 yuan/mt. Support below is expected to around 151,000 yuan/mt.