SMM Morning Comments (Dec 22): Shanghai base metals weakened across the board on new Covid strain

Published: Dec 22, 2020 10:00
Shanghai base metals all cruised lower on Tuesday morning as a new coronavirus variant in the UK sparked worries on economic recovery, and their counterparts on the LME set for a mixed start as US Congress prepares to vote on a stimulus deal.

SHANGHAI, Dec 22 (SMM) — Shanghai base metals all cruised lower on Tuesday morning as a new coronavirus variant in the UK sparked worries on economic recovery, and their counterparts on the LME set for a mixed start as US Congress prepares to vote on a stimulus deal.

Shanghai base metals fell across the board in overnight trading. Copper shed 1.42%, aluminium fell 1.89%, zinc weakened 0.86%, lead slumped 2.43%, nickel pulled back 2% and tin lost 1.41%. 

The LME complex performed similarly on Monday. Copper slid 1.51%, aluminium weakened 1.39%, zinc shed 0.35%, lead tumbeld 3.84%, nickel retreated 0.74% and tin slipped 0.6%. 

Copper: Three-month LME copper ended 1.51% lower at $7,875/mt on Monday. The most-traded SHFE 2102 copper contract shed 1.42% to close at 58,410 yuan/mt in overnight trading, with open interest decreasing 6,383 lots to 119,000 lots.

A rebound in the US dollar index overnight weighed on copper futures. Congressional leaders in Washington moved toward the passage of a $900 billion economic relief package. An agreement was reached on Sunday night, but the text of the final deal was not released until Monday afternoon. A vote is expected on Monday night. But the new Covid mutation in the UK has resulted in lockdown in most parts of the country and prompted several European countries to cut off transport with the UK, and this sparked worries about the economic recovery.

LME copper is expected to trade between $7,850-7,930/mt today, and SHFE copper between 58,300-58,800 yuan/mt, while spot copper will be traded between discounts of 200 yuan/mt and 120 yuan/mt.

Zinc: Three-month LME zinc touched $2,900/mt in European trading hours, its highest in 2020, but later slumped to an intraday low of $2,786/mt as the US dollar strengthened. The contract closed 0.35% weaker at $2,848/mt on Monday, with open interest rising 1,312 lots to 233,000 lots. Zinc stocks across LME-listed warehouses dropped by 1,625 mt or 0.77% to 208,325 mt. The dollar gained against most currencies on Monday, as a fast-spreading new coronavirus strain prevalent in Britain prompted investors to seek safety in the greenback, and this pressured LME zinc. But Congressional leaders in Washington moved towards the passage of a $900 billion economic relief package and positive progress in vaccines lent some support to zinc prices. LME zinc is expected to fluctuate between $2,820-2,870/mt today.

The most-traded SHFE 2102 zinc contract fell 0.86% to settle at 21,805 yuan/mt in overnight trading, with open interest adding 697 lots to 98,149 lots. The more transmissible new coronavirus strain in the UK boosted risk-off sentiment. Treatment charges (TCs) for domestic zinc concentrate dipped slightly, but its supply remained tight, which provided support to zinc prices. The February 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 80-100 yuan/mt against the January contract.

Nickel: The most-active SHFE 2102 nickel contract slumped 2% to close at 128,420 yuan/mt in overnight trading, after earlier hitting a more than one-week low at 127,170 yuan/mt, with open interest decreasing 12,000 lots to 124,000 lots.

Lead: Three-month LME lead tumbled 3.84% to close at $1,952/mt on Monday, posting a four-day losing streak. Several countries blocked their borders to the UK due to the new virus variant in the country. Worries over the new virus strain overshadowed the progress in US economic stimulus talks.

The most-liquid SHFE 2102 lead contract plunged 2.43% to end at 14,445 yuan/mt in overnight trading.

Tin: Three-month LME tin declined 0.6% to close at $19,960/mt on Monday. The dollar index hit a 10-day high earlier in the Monday session. Analysts said volatile moves are typical of this time of year when volumes are thin. LME tin stocks extended declines to 2,940 mt. Tight tin supply overseas will underpin tin prices in the near term. LME tin is expected to trade between $19,600-20,300/mt today. 

The most-traded SHFE 2102 tin contract fell 1.41% to settle at 150,800 yuan/mt in overnight trading, after hitting a one-week low at 150,800 yuan/mt earlier in the session, with open interest decreasing 1,699 lots to 27,856 lots. Support below will be seen from the 150,000 mark 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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SMM Morning Comments (Dec 22): Shanghai base metals weakened across the board on new Covid strain - Shanghai Metals Market (SMM)