SMM Morning Comments (Dec 24): Shanghai base metals rose across the board as investors eye developments on Brexit trade deal talks

SHANGHAI, Dec 24 (SMM) — Shanghai base metals advanced across the board on Thursday morning, holding onto overnight gains, while their counterparts on the LME set for a mixed start, as investors expect a Brexit trade deal between the UK and the European Union as it approaches the deadline. 

Shanghai base metals all closed higher in overnight trading. Copper advanced 1.13%, aluminium added 0.8%, zinc gained 0.63%, lead rose 1.67%, nickel firmed 0.79% and tin climbed 0.54%.

The LME complex performed similarly on Wednesday. Copper rose 1.3%, aluminium added 0.53%, zinc increased 1.18%, lead and nickel advanced 0.87% and tin gained 0.48%. 

Copper: Three-month LME copper rose 1.3% to end at $7,847/mt on Wednesday, after hitting a nearly two-week low at $7,673/mt earlier in the session.  The most-traded SHFE 2102 copper contract advanced 1.13% to close at 58,350 yuan/mt in overnight trading.

US President Donald Trump threatened to not sign the relief bill passed by the Congress, but investors remained optimistic about a larger US economic stimulus package. The dollar slipped on Wednesday, after gaining for three straight sessions, as risk appetite rose on the expectation of an imminent Brexit trade deal between the UK and the European Union. Oil prices rose more than 2% on Wednesday, boosted by draws in US inventories of crude, gasoline and distillates that lifted investors’ hopes for some return in fuel demand, and this favoured copper futures. LME copper is expected to trade between $7,810-7,890/mt today, and SHFE copper between 58,200-58,700 yuan/mt, while spot copper will be traded between discounts of 20 yuan/mt and premiums of 80 yuan/mt.

Zinc: Three-month LME zinc fell to a more than two-week low of $2,768/mt after the bell, before reversing the losses to end 1.18% higher at $2,824/mt on Wednesday, with open interest decreasing 1,244 lots to 234,000 lots. Zinc stocks across LME-listed warehouses dropped by 650 mt or 0.31% to 206,225 mt. The expectation of an imminent Brexit trade deal between the UK and the European Union boosted risk appetite. US jobless claims remained elevated, but fell more than expected in the week ended December 19. These boosted LME zinc. But concerns on the new highly infectious coronavirus strain may pressure zinc prices. LME zinc is expected to fluctuate between $2,770-2,820/mt today.

The most-traded SHFE 2102 zinc contract added 0.63% to settle at 21,530 yuan/mt in overnight trading, with open interesting rising 442 lots to 95,117 lots. Positive domestic vaccine news and still tight zinc concentrate supply underpinned SHFE zinc, but the recent environmental protection inspections and restrictions on electricity consumption are likely to weigh on downstream consumption. The February contract is likely to move between 21,300-21,800 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen higher at 140-160 yuan/mt against the January contract.

Nickel: The most-active SHFE 2103 nickel contract ended 0.79% higher at 125,350 yuan/mt in overnight trading, with open interest rising 6,985 lots to 134,000 lots.

Lead: Three-month LME lead gained 0.87% to close at $1,977/mt on Wednesday. A falling US dollar, an imminent Brexit trade deal and positive vaccine overshadowed President Donald Trump’s threat to veto the U.S. stimulus bill.

The most-liquid SHFE 2102 lead contract ended 1.67% firmer at 14,605 yuan/mt in overnight trading. Although the increase in SHFE lead stocks is expected to slow at the end of the year, fundamentals remained weak.

Tin: Three-month LME tin closed 0.48% higher at $20,040/mt on Wednesday. The dollar slipped on Wednesday, after gaining for three straight sessions, as risk appetite rose on the expectation of an imminent Brexit trade deal between the UK and the European Union.
Sterling and the euro took off against the greenback after the Brexit headlines, as did currencies tied to higher risk appetite such as the Australian, Canadian, and New Zealand dollars. LME tin is expected to trade between $19,800-20,300/mt today.

The most-liquid SHFE 2102 tin contract firmed 0.54% to end at 151,280 yuan/mt in overnight trading, with open interest decreasing 403 lots to 22,859 lots. Support below will be seen from the 150,000 mark today.