SMM Morning Comments (Jan 6): Shanghai base metals were mostly higher as investors monitored Chinese tech

Published: Jan 6, 2021 10:00

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Nonferrous metals on the SHFE were mostly higher on Wednesday morning, and their counterparts on the LME rose across the board, as developments turned the focus on Chinese tech giants.

SHANGHAI, Jan 6 (SMM) — Nonferrous metals on the SHFE were mostly higher on Wednesday morning, and their counterparts on the LME rose across the board, as developments turned the focus on Chinese tech giants.

Shanghai base metals mostly advanced in overnight trading. Tin added 0.32%, copper rose 0.91%, lead increased 0.37%, zinc went up 0.67% and nickel strengthened 0.64%, while aluminium fell 0.49%.

The LME complex rose across the board on Tuesday. Copper was the best performer with a rise of 2.48%. Lead advanced 0.51%, tin edged up 1.12%, aluminium climbed 0.89%, zinc increased 1.18% and nickel went up 2.04%.

Copper: Three-month LME copper rose 2.48% to end at $8,050.5/mt on Tuesday, and is likely to trade between $7,960-8,040/mt today.

The most-active SHFE 2102 copper contract went up 0.88% to close at 58,620 yuan/mt in overnight trading, and it is expected to move between 58,400-58,900 yuan/mt today, while spot premiums will be seen at 70-150 yuan/mt.

It was announced last night that US ISM manufacturing PMI stood at 60.7 in December, the highest since August 2018. The positive manufacturing data eased the market's worries about the global economic recovery. In addition, Saudi Arabia unexpectedly announced that it would voluntarily reduce production by 1 million barrels per day in February and March, and the US oil rose by 5% at one time. The US dollar index fell sharply again last night, leading to a sharp rise in copper prices. On the spot side, the quotation is firm in the market dominated by traders, and the overall supply is still tight with low market inventories. The right to control the price is in the hands of the goods holder. With the gradual return of market participants, the long-term order in the new year will be opened, and it is expected that the spot premium will steadily become stronger.

Zinc: Three-month LME zinc rose 1.18% to close at $2,831/mt on Tuesday. Zinc stocks at LME-listed warehouses fell 50 mt to 202,025 mt. The weakness of US dollar provided basic support for LME zinc, while US stocks rose across the board. Saudi Arabia took the initiative to cut production to boost crude oil, and the combination of rising inflation expectations boosted market sentiment. The contract is likely to trade between $2,790-2,840/mt today.

The most-liquid SHFE 2102 zinc contract rose 0.67% to end at 21,170 yuan/mt in overnight trading. Overnight, LME zinc drove SHFE Zinc to continue to run at a high level. Domestic TC in continued to decrease, and the supply-side zinc ore shortage still provided momentum for zinc prices. Moreover, domestic inventories piled up sharply, and zinc prices are expected to keep fluctuating robustly. 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 300-350 yuan/mt.

Nickel: The most-active SHFE 2103 nickel contract rose 2.18% to close at 129,580 yuan/mt on Tuesday. Open interests rose 7,541 lots to 175,333 lots. The fundamentals are still stable with rigid demand of consumption. As the spot market of stainless steel has improved, steel mills have no possibility of significantly reducing production for the time being. The stable prices of high nickel pig iron are mainly due to the fact that steel mills are not in the procurement cycle at present, and there is a small upward space and the demand is likely to be released after the New Year holiday. In term of refined nickel, the spot supply is tight, premiums and discounts are high, and inventories continued to decline.

Lead: Three-month LME lead settled 0.51% higher at $2,075.5/mt on Tuesday.

The most-active SHFE 2102 lead contract went up 0.37% to close at 15,085 yuan/mt on Tuesday night. Pre-holiday restocking expectation and positive macro sentiment still gave SHFE lead some support, and it is still necessary to be alert to the impact of pandemic at home and abroad on investor confidence.

Tin: Three-month LME tin closed up 1.12% at $21,205/mt on Tuesday. The dollar fell again, approaching its lowest level since April 2018. Due to the tight supply of refined tin overseas and positive macro sentiment, the trend of LME tin is strongly supported, and it is expected to keep trading at high in the near term. Pressure above will be seen from $21,500 /mt today. Support below will be seen from $20,200/mt today.

The most-liquid SHFE 2103 tin contract fell 0.64% at 158,040 yuan/mt on Tuesday night. The trend guidance provided by LME tin will be monitored today. Pressure above will be seen from 160,000 yuan/mt today. Support below will be seen from 153,700 yuan/mt today.

Market commentary Copper Aluminium Zinc Nickel Lead Tin

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