SMM Morning Comments (Mar 1): Shanghai base metals fell across the board as China said its factory activity growth slowed in February

SHANGHAI, Mar 1 (SMM) — Nonferrous metals on both SHFE and LME declined across the board on Monday morning as official data released over the weekend showed China’s manufacturing activity growth slowing in February.

China’s official manufacturing Purchasing Managers’ Index (PMI) for February came in at 50.6, according to data released by the country’s National Bureau of Statistics over the weekend. That was lower than January’s reading of 51.3 but still above the 50 level that separates expansion from contraction.

Shanghai base metals fell across the board in overnight trading. Copper fell 3.22%, aluminium declined 1.9%, zinc shed 2.68%, tin weakened 3.27%, lead slid 2.93% and nickel edged down 2.81%.

The LME complex fell across the board on Monday. Tin plunged 6.58% to lead the losses, zinc fell 3.79%, aluminium weakened 3.49%, copper slid 4.38%, lead went down 4.24% and nickel dropped 3.37%.

Copper: Three-month LME copper fell 3.79% to end at $9,000/mt on last Friday, and is likely to trade between $9,020-9,100/mt today.

The most-active SHFE 2104 copper contract went down 1.52% to close at 66,920 yuan/mt in overnight trading, and it is expected to move between 67,000-67,500 yuan/mt today, while spot premiums will be seen at 100-110 yuan/mt.

Last Thursday, the surge in US bond yields continued to boost investors' interest in the US dollar. On Friday night, the US dollar index continued to rise, and the intraday high hit 90.963, putting upward pressure on copper futures. On Friday night, US oil plunged 3%, the biggest drop since November. The strengthening of the US dollar and the worry about inflation have brought pressure on oil prices, and also suppressed copper contracts to a certain extent. Copper contracts fell sharply on Friday night. Biden's $1.9 trillion pandemic relief plan has been approved by the House of Representatives and is about to land. Overall, macro optimism still exists, and it is expected that copper prices will still have a chance to rebound. On the spot side, consumption gradually turns to the peak season in March, and if the market is stable, the premium is expected to rise further.

Aluminium: Three-month LME aluminium fell 2.77% to close at $2,157/mt on Friday, with open interest rising to 707,000 lots. It is expected to trade between $2,050-2,250/mt today. The influence of overseas macro liquidity and guiding indicators such as US dollar index and crude oil on LME metals should continue to be monitored.

The most-liquid SHFE 2014 aluminium contract dropped 2.26% to settle at 17,070 yuan/mt on Friday night, and is likely to trade between 16,850-17,250 yuan/mt today. It is expected that the contract will still fluctuate at high in the near term. It is suggested that downstream restocking should be based on demand, be wary of the large price fluctuations in the high valuation range. The impact of domestic supply and demand mismatch on short-term market sentiment fluctuations after the CNY will be monitored on the fundamentals. Spot premiums for the contract will be seen higher around 50 yuan/mt.

Zinc: Three-month LME zinc fell 2.9% to close at $2,780.5/mt on last Friday. Zinc stocks at LME-listed warehouses fell 700 mt to 269,775 mt. Last week, the soaring yield of US bonds caused market concern, but Fed officials reiterated inflation expectations many times to calm market sentiment and maintain a loose monetary environment in the future. Biden's stimulus bill won enough votes in the House of Representatives, and the specific implementation of the stimulus bill will be monitored in the near term. The contract is likely to trade between $2,770-2,820/mt today.

The most-liquid SHFE 2104 zinc contract fell 1.86% to end at 21,090 yuan/mt in overnight trading. Last week, the whole downstream mainly digested inventory, completed orders and sold finished products before the CNY, and a small amount of rigid demand received goods at low prices. Spot transactions were tepid and the increase in social stocks suppressed zinc prices. However, this week, the smelter will enter the peak production season to further reduce TCs, which will boost zinc prices. The recovery of downstream demand will be monitored in the near term. The SHFE zinc contract is expected to move between 20,900-21,400 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen higher at 50-70 yuan/mt.

Nickel: The most-active SHFE 2104 nickel contract fell 2.81% to close at 138,120 yuan/mt on last Friday. Open interests fell 4,480 lots to 123,000 lots. Whether the fundamentals can support the contract to move above 140,000 yuan/mt again after the weakening of macro sentiment will be monitored today.

Lead: Three-month LME lead settled 3.64% lower at $2,044/mt on last Friday. Last Friday night, the yield of public debt soared, the financial market was shrouded in risk aversion, and the bulls took profits and left. The contract may face a slight correction in the near term, and whether the 60-day moving average can provide effective support will be monitored next week.

The most-active SHFE 2104 lead contract trended lower on Friday night, ending 2.93% lower at 15,265 yuan/mt. Trading in the domestic spot market is cautious under the recent sharp rise and fall. The cost support under the contract is relatively enough due to the continuous price increase of battery scrap and tight supply of concentrates, and it is expected that the contract will continue to fluctuate at high after a slight decline.

Tin: Three-month LME tin closed down 4.38% at $25,245/mt on last Friday. LME tin stocks fell 10 mt to 1,730 mt last week. There is a need for adjustment after the continuous rise. Pressure above will be seen from $26,500/mt today. Support below will be seen from $24,000/mt today.

The most-liquid SHFE 2104 tin contract fell 1.16% at 182,260 yuan/mt on Friday night. Affected by the downward trend of the LME tin, the contract is expected to fluctuate weakly in the near term. Pressure above will be seen from 190,000 yuan/mt today. Support below will be seen from 175,000 yuan/mt today.