SMM Morning Comments (Feb 24): Nonferrous metals on the LME rose across the board after Powell’s testimony to US Congress

SHANGHAI, Feb 24 (SMM) — Nonferrous metals on the LME all cruised higher on Wednesday morning, as Federal Reserve chair Jerome Powell said the central bank would keep its policies in place as it focused attention on getting Americans back to work. “The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved,” said Powell. Their counterparts on the SHFE fell for the most part though. 

Shanghai base metals, except for copper, closed lower in overnight trading. Aluminium edged down 0.03%, zinc shed 1.15%, nickel weakened 1.41%, lead slid 1.01% and tin fell 1.42%, while copper added 0.75%. 

The LME complex performed similarly on Tuesday. Aluminium slipped 0.97%, zinc weakened 1.3%, nickel slid 0.69%, lead fell 1.94% and tin declined 1.38%, while copper rose 1.5%. 

Copper: Three-month LME copper closed 1.5% higher at $9,250/mt on Tuesday. The most-traded SHFE 2104 copper contract slid to a session low of 66,560 yuan/mt before wiping out losses to end 0.75% higher at 68,060 yuan/mt in overnight trading.

In testimony before the US Senate Banking Committee, Federal Reserve chair Jerome Powell said the central bank would keep its policies in place as it focused attention on getting Americans back to work, which relieved some of the concerns about higher interest rates and inflation. The US dollar index rebounded overnight, putting pressure on copper futures. However, the growing likelihood that Congress will pass President Joe Biden’s $1.9 trillion stimulus plan and optimistic outlook on economic recovery supported copper prices. LME copper is expected to trade between $9,210-9,290/mt today, and SHFE copper between 68,000-68,500 yuan/mt, while spot copper will be traded between discounts of 100 yuan/mt and premiums of 20 yuan/mt.

Aluminium: Three-month LME aluminium fell to an intraday low of $2,126.5/mt before regaining some ground to settle 0.97% lower at $2,154/mt on Tuesday, with open interest adding 2,813 lots to 697,000 lots.

The most-active SHFE 2104 aluminium contract edged down 0.03% to close at 16,705 yuan/mt in overnight trading, with open interest rising 742 lots to 210,000 lots. It is expected to move between 16,600-16,900 yuan/mt today.

Zinc: Three-month LME zinc declined 1.3% to end at $2,850/mt on Tuesday. Zinc stocks across LME-listed warehouses dropped by 1,225 mt or 0.45% to 271,950 mt. It is likely to move between $2,830-2,880/mt today.

The most-liquid SHFE 2104 zinc contract fell 1.15% to settle at 21,540 yuan/mt in overnight trading, with open interest adding 3,401 lots to 72,601 lots. Although some downstream plants resumed operations earlier than previous years due to the policy of encouraging workers to stay where they work for the Spring Festival, operating rates were low, which weighed on zinc prices. But shrinking feedstock inventories at downstream users will limit further decline in zinc prices. The April zinc contract is likely to move between 21,300-21,800 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen at 70-80 yuan/mt against the March contract.

Nickel: The most-active SHFE 2104 nickel contract dropped 1.41% to end at 143,190 yuan/mt in overnight trading, with open interest decreasing 13,000 lots to 162,000 lots.

Lead: Three-month LME lead shed 1.94% to settle at $2,126/mt on Tuesday. LME lead stocks shrank for two consecutive trading days to 94,525 mt. 

The most-liquid SHFE 2014 lead contract declined 1.01% to close at 15,730 yuan/mt in overnight trading.  

Tin: Three-month LME tin weakened 1.38% to end at $26,515/mt on Tuesday. The dollar was modestly higher on Tuesday. Some analysts believed that a gradual economic recovery and expectations of ample liquidity lifted risk appetite and dented allure of the safe-haven currency. LME tin stocks expanded 105 mt to 1,510 mt. LME tin is expected to remain high, moving between $25,000-28,000/mt today, as global tin supply has yet to rise significantly. 

The most-active SHFE 2104 tin contract slipped 1.11% to end at 188,550 yuan/mt in overnight trading, with open interest losing 5,771 lots to 31,444 lots. It is expected to trade between 180,000-200,000 yuan/mt today.