SMM Morning Comments (Feb 2): Shanghai base metals fell for the most part as China’s Caixin manufacturing PMI eased in December

Published: Feb 2, 2021 10:14
Shanghai base metals declined broadly on Tuesday morning, while their LME counterparts set for a mixed start.

SHANGHAI, Feb 2 (SMM) — Shanghai base metals declined broadly on Tuesday morning, while their LME counterparts set for a mixed start. 

China's manufacturing activity moderated in December due to weak demand for the country's exports, according to a private survey of manufacturers.

The Caixin China purchasing managers' index, which is weighted toward small, private manufacturers, was 53.0 in December, Caixin Media Co. and research firm Markit said Monday. It had dropped from November's 54.9, which was its highest level in a decade.

December's reading was the eighth consecutive month that the Caixin PMI held above the 50 mark, which indicates an expansion in activity.

Shanghai base metals, except for aluminium, cruised lower in overnight trading. Copper and lead weakened 0.5%, zinc shed 0.76%, nickel edged down 0.14% and tin slipped 0.44%, while aluminium inched up 0.13%. 

The LME complex, except for aluminium, closed higher on Monday. Copper added 0.12%, zinc advanced 0.16%, lead gained 0.44%, nickel rose 1.19% and tin surged 2.31%, while aluminium shed 0.83%. 

Copper: Three-month LME copper added 0.12% to close at $7,822.5/mt in choppy trading on Monday, while the most-active SHFE 2103 copper contract shed 0.5% to settle at 57,610 yuan/mt in overnight trading.

Overnight, US final Markit manufacturing PMI for January stood at 59.2, recording a new high since May 2007. Strong manufacturing PMI supported the US dollar, which weighed on copper futures.  Trades were quiet in the spot market as downstream processors and traders gradually suspend production for the Chinese New Year (CNY) holiday.

LME copper is expected to trade between $7,780-7,860/mt today, and SHFE copper between 57,400-57,900 yuan/mt, while spot copper will be traded at premiums of 50-130 yuan/mt.

Aluminium: Three-month LME aluminium declined 0.83% to settle at a two-week low of $1,960.5/mt on Monday.

The most-liquid SHFE 2103 aluminium contract inched up 0.13% to close at 15,220 yuan/mt in overnight trading, with open interest decreasing 1,540 lots to 173,000 lots. It is expected to move between 14,900-15,200 yuan/mt today, while spot premiums will be seen at 0-20 yuan/mt.

Zinc: Three-month LME zinc inched up 0.16% to end at $2,575/mt on Monday. Zinc stocks across LME-listed warehouses dropped by 1,100 mt or 0.38% to 291,750 mt. A stronger US dollar pressured zinc prices, but robust US economic data and lent some support. LME zinc is likely to fluctuate between $2,550-2,600/mt today.

The most-traded SHFE 2103 zinc contract declined 0.76% to close at 19,545 yuan/mt in overnight trading. Trades became quiet in the spot market as more downstream plants have started the CNY holiday, and zinc social inventories built up, which weighed on zinc prices. But tight zinc concentrate supply and optimism over post-holiday consumption limited the decline in prices. The March contract is likely to move between 19,300-19,800 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen at 180-190 yuan/mt against the February contract.

Nickel: The most-active SHFE 2104 nickel contract weakened 0.14% to end at 131,980 yuan/mt in overnight trading.

Lead: Three-month LME lead settled 0.44% higher at $2,033/mt on Monday. LME lead stocks shrank 1,975 mt to 96,775 mt, hitting a new low in nearly six months, which supported lead prices. 

The most-liquid SHFE 2103 lead contract slid 0.5% to end at 15,050 yuan/mt in overnight trading after hitting a nearly two-week low at 14,910 yuan/mt earlier in the session. Trades became quiet and declines in lead ingot social inventories slowed down as downstream battery makers have gradually completed year-end restocking.

Tin: Three-month LME tin increased 2.31% to close at $23,070/mt on Monday. The dollar index was up 0.37% to 90.955 in late afternoon trading in New York, just off of levels last seen on Dec. 21, amid views that the United States has an advantage in growing its economy and vaccinating its population against COVID-19.  LME tin stocks extended declines to 820 mt. Tight tin supply will continue to underpin tin prices in the near term. LME tin is expected to trade between $22,000-24,000/mt today.

The most-active SHFE 2103 tin contract fell 0.44% to end at 169,120 yuan/mt in overnight trading.   It is likely to fluctuate between 167,000-175,000 yuan/mt 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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