SMM Morning Comments (Jan 20): Shanghai base metals were mostly higher as investors focused on China’s benchmark lending rate

SHANGHAI, Jan 20 (SMM) — Shanghai base metals were mostly higher on Wednesday morning as investors waited for the release of China's latest benchmark lending rate. Meanwhile, their counterparts on the LME also rose for the most part.

Shanghai base metals mostly advanced in overnight trading. Zinc advanced 0.1%, tin edged up 0.9%, lead climbed 0.74% and nickel increased 0.9%, while copper and aluminium underperformed with 0.17% and 0.78% losses respectively.

The LME complex performed similarly on Tuesday. Copper added 0.14%, aluminium rose 0.61%, lead increased 0.2%, zinc went up 0.3% and nickel strengthened 0.25%, while tin fell 0.47%.

Copper: Three-month LME copper rose 0.62% to end at $7,994/mt on Tuesday, and is likely to trade between $7,970-8,050/mt today.

The most-active SHFE 2103 copper contract went down 0.12% to close at 58,820 yuan/mt in overnight trading, and it is expected to move between 58,700-59,200 yuan/mt today, while spot premiums will be seen at 150-210 yuan/mt.

Yellen, the nominee of the US Treasury Secretary, said at the confirmation hearing of the Senate that helping the unemployed and small businesses would maximize the effectiveness of the bailout funds, and urged legislators to take "big moves" to stimulate the economy. Market risk sentiment improved, US dollar index fell, and copper futures gained upward momentum. However, the COVID-19 is raging. At present, the cumulative number of deaths in COVID-19 in the US exceeds 400,000. Germany tightened the restrictions on pandemic prevention and extended the blockade until mid-February. The single-day new deaths in Britain are the highest since the outbreak of the pandemic. Heilongjiang, Hebei and other regions in China are classified as high-risk areas. The uncertainty brought by the pandemic to the economy makes it difficult to cool down the cautious sentiment of the market. On the spot side, social inventories continues to decline. It is expected that the premium will maintain the price-holding sentiment in the near term.

Aluminium: Three-month LME aluminium climbed 0.15% to close at $1,973/mt on Tuesday, with open interest falling to 742,000 lots. The impact of LME aluminium inventory changes on prices should continue to be monitored. It is expected to trade between $1,900-2,010/mt today. 

The most-liquid SHFE 2013 aluminium contract fell 0.78% to settle at 14,710 yuan/mt on Tuesday night, and is likely to trade between 14,600-14,950 yuan/mt today. The impact of inventory changes on market sentiment and contract structure should continue to be monitored. Spot premiums for the contract will be seen higher at 40-80 yuan/mt.

Zinc: Three-month LME zinc rose 0.45% to close at $2,690/mt on Tuesday. Zinc stocks at LME-listed warehouses fell 1,500 mt to 196,625 mt. The large-scale fiscal stimulus plan of the US is expected to boost the overall risk appetite, and the weakness of the US dollar will provide basic support for nonferrous metals. Biden was officially sworn in as President of the US today. Macro guidelines will be monitored in the near term. The contract is likely to trade between $2,680-2,730/mt today.

The most-liquid SHFE 2103 zinc contract rose 0.1% to end at 20,335 yuan/mt in overnight trading. TC at home and abroad continued to fall, and smelters' profits narrowed, which reduced production. According to an SMM survey, smelters are expected to reduce production by 10,300 mt in January. With the spread of the pandemic in the downstream north, the downstream demand for zinc fell, and with weak supply and demand, zinc prices are likely to continue to fluctuate in the near term. The SHFE zinc contract is expected to move between 20,000-20,500 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen higher at 150-160 yuan/mt.

Nickel: The most-active SHFE 2103 nickel contract rose 0.9% to close at 135,040 yuan/mt on Tuesday. Open interests stood at 241,857 lots. The contract is expected to move between 130,000-136,000 yuan/mt.

Lead: Three-month LME lead settled 0.78% higher at $2,010.5/mt on Tuesday. The impact of US economic stimulus plan on the market will be monitored.

The most-active SHFE 2103 lead contract went up 0.74% to close at 15,005 yuan/mt on Tuesday night. The trend of tight demand has not been alleviated, the pre-holiday plans of large storage enterprises are delayed or stuck, and the market still expects the downstream restock. The impact of domestic pandemic development on both ends of supply and demand will be monitored in the near term.

Tin: Three-month LME tin closed down 0.52% at $21,115/mt on Tuesday. The US dollar fell for the second consecutive trading day. As the overall risk willingness improved, it may be necessary for investors to take significant fiscal stimulus measures against Yellen, the nominee of US Treasury Secretary. At present, people think that the large-scale fiscal stimulus plan is widely supported by both parties in the Senate, rather than a long reconciliation process. The tight supply of refined tin overseas supported the trend of LME tin, and the contract is expected to fluctuate strongly. Pressure above will be seen from $21,500 /mt today. Support below will be seen from $20,500/mt today.

The most-liquid SHFE 2103 tin contract rose 0.12% at 158,110 yuan/mt on Tuesday night. The guidance given by the trend of LME tin and its surrounding markets will be monitored. SHFE tin is expected to keep fluctuating robustly today. Pressure above will be seen from 160,000 yuan/mt today. Support below will be seen from 155,000 yuan/mt today.