SMM Morning Comments (Jan 5): Shanghai base metals were mostly higher following overnight Wall Street plunge

SHANGHAI, Jan 5 (SMM) — Nonferrous metals on the SHFE were mostly higher on Tuesday morning, and their counterparts on the LME rose across the board, following an overnight drop on Wall Street as fears surrounding the coronavirus pandemic lingered.

Shanghai base metals mostly advanced in overnight trading. Tin added 2.26%, aluminium rose 1.41%, lead increased 1.14%, zinc went up 0.53% and nickel strengthened 1.61%, while copper fell 0.26%.

The LME complex rose across the board on Monday. Nickel was the best performer with a rise of 4.86%. Lead advanced 3.85%, tin edged up 3.05%, aluminium climbed 2.5%, zinc increased 1.78% and copper went up 1.32%.

Copper: Three-month LME copper rose 1.32% to end at $7,856/mt on Monday, and is likely to trade between $7,820-7,900/mt today.

The most-active SHFE 2102 copper contract went down 0.45% to close at 57,900 yuan/mt in overnight trading, and it is expected to move between 57,700-58,200 yuan/mt today, while spot premiums will be seen at 40-100 yuan/mt.

The global surge in COVID-19 cases darkens the prospects for economic recovery. The single-day confirmed cases of COVID-19 in the US soared to a record level of nearly 300,000 cases, and the more transmissible mutant strains may aggravate the pandemic situation. The British Prime Minister ordered the whole of England to implement an epidemic prevention blockade. Under the cautious mood, the three major stock indexes collectively fell at night, and the S&P 500 reached the biggest drop in the past 10 weeks. In addition, oil prices dropped sharply from the high level, the US dollar index rebounded at the low level, and copper under pressure dropped sharply at night. On the spot side, the market activity gradually picked up in an orderly manner, and it is expected that the premium will also stabilise.

Zinc: Three-month LME zinc rose 1.78% to close at $2,798/mt on Monday. Zinc stocks at LME-listed warehouses fell 150 mt to 202,075 mt. Overnight, the weakening of the US dollar boosted the growth of nonferrous metals. US Markit manufacturing PMI reached a new high in November since September 2014, which boosted the trend of LME zinc, but the continuous fermentation of overseas pandemic limited the upside space of LME zinc. The contract is likely to trade between $2,750-2,800/mt today.

The most-liquid SHFE 2102 zinc contract rose 0.53% to end at 20,970 yuan/mt in overnight trading. The US dollar index fell overnight, while A shares rose. The improvement of domestic manufacturing economic data provided basic support for SHFE zinc. Cold weather dragged down some downstream consumption and led to the increase in social inventories. Pandemic fermentation should be monitored in the near term. The SHFE zinc contract is expected to move between 20,800-21,300 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen higher at 200-250 yuan/mt.

Nickel: The most-active SHFE 2102 nickel contract rose 1.61% to close at 128,900 yuan/mt on Monday. Open interests rose 5,101 lots to 173,000 lots. Whether the contract could maintain its upward trend and the pressure from 130,000 yuan/mt will be monitored today. Overseas investors' expectations for economic recovery are still high, the US dollar index has dropped sharply, and all major commodities have risen sharply. Although the state ministries and commissions announced during the holiday that the subsidy policy for new energy vehicles had declined by 20%, it met market expectations, while Tesla continued to cut prices in China, attracting market attention. In addition, Xugong Group announced the establishment of new energy vehicle projects, and the Indonesian earthquake caused power outage, which affected the supply. On the first day after the holiday, the capital atmosphere was warm, and the probability stocks of new energy all rose sharply.

Lead: Three-month LME lead settled 3.85% lower at $2,065/mt on Monday.

The most-active SHFE 2102 lead contract went up 1.14% to close at 15,095 yuan/mt on Monday night. Yesterday, the A-share market and RMB rose sharply, and a good macro atmosphere boosted SHFE lead.

Tin: Three-month LME tin closed up 3.05% at $20,970/mt on Monday. Yesterday, the LME complex rose across the board. The US dollar index cooled down due to market optimism, and the US stock market plummeted. The US dollar index hit 89.42 earlier in the session. The tight supply of refined tin overseas and the expected pressure on the US dollar in the economic stimulus plan have strongly supported the trend of LME tin. After yesterday's sharp rise, the contract once again entered the overbought area and the adjustment risk will be monitored in the near term. Pressure above will be seen from $21,500 /mt today. Support below will be seen from $20,100/mt today.

The most-liquid SHFE 2103 tin contract rose 1.72% at 157,010 yuan/mt on Monday night. The contract is expected to trade at high in the near term. It will test support from 155,000 yuan/mt today. Pressure above will be seen from 160,000 yuan/mt.