SMM Morning Comments (Mar 26): Shanghai base metals were mostly lower following Dow’s overnight rebound

SHANGHAI, Mar 26 (SMM) — Nonferrous metals on both SHFE and LME mostly cruised lower on Friday morning as Covid surged and Fed comments weighed on sentiment.

Shanghai base metals ended mostly lower in overnight trading. Copper edged down 1.09%, zinc weakened 0.35%, tin shed 1.5%, lead fell 0.4% and aluminium lost 0.2%, while nickel added 0.41%.

The LME complex performed similarly on Thursday. Copper plunged 1.01% to lead the losses, nickel fell 0.09%, zinc weakened 0.2% and tin slid 0.26%, while aluminium gained 0.36% and lead rose 0.21%.

Copper: Three-month LME copper fell 1.01% to end at $8,799/mt on Thursday, and is likely to trade between $8,750-8,830/mt today.

The most-active SHFE 2105 copper contract went down 0.17% to close at 65,450 yuan/mt in overnight trading, and it is expected to move between 65,400-65,900 yuan/mt today, while spot discounts will be seen at 120-70 yuan/mt.

Last night, it was announced that the number of initial jobless claims in the US fell to the lowest level in one year last week, and the continuous recovery of the job market boosted market sentiment. However, at present, the number of cases of COVID-19 rebounded, and the daily average number of new cases in the US increased to the maximum since mid-January. The rebound of COVID-19 in Europe caused the European government to tighten the pandemic prevention blockade, and the market cautious mood increased. The safe-haven demand boosted the US dollar index to rise continuously, while copper futures are under pressure. In addition, the blockade measures caused investors to worry about the demand for crude oil again, and the oil price plunged sharply at night, which suppressed copper futures. On the spot side, the transaction under long term contracts is coming to an end in March. With the callback of the contract, the willingness of traders and downstream purchasing at low prices and high discounts remained unchanged, while there was still a big gap with the expected peak consumption season. Before the inventory does not show an obvious turning point of declining, the discount will continue to linger in the near future range.

Aluminium: Three-month LME aluminium rose 0.36% to close at $2,256/mt on Thursday. It is expected to trade between $2,230-2,260/mt today.

The most-liquid SHFE 2105 aluminium contract fell 0.2% to settle at 17,125 yuan/mt on Thursday night, and is likely to trade between 17,000-17,300 yuan/mt today. Spot still continued the pattern of discount.

Zinc: Three-month LME zinc fell 0.2% to close at $2,780/mt on Thursday. Zinc stocks at LME-listed warehouses fell 125 mt to 271,225 mt. The yield of China's national debt rose slightly, the US dollar hit a four-month high, and Europe tightened the pandemic prevention blockade, which led to the decrease of LME zinc under pressure. However, the number of initial jobless claims unexpectedly dropped sharply last week, limiting its decline. The contract is likely to trade between $2,760-2,810/mt today.

The most-liquid SHFE 2105 zinc contract fell 0.35% to end at 21,475 yuan/mt in overnight trading. On the fundamentals, the tight pattern of the mine end has not changed, and TCs are still at a low level. Under the influence of environmental protection in the north, the smelting end is disturbed to some extent, and the support of the supply end still exists. However, the macro sentiment was disturbed, the instability increased, and the market risk aversion warmed up, which is expected to suppress zinc prices to some extent. The SHFE zinc contract is expected to move between 21,300-21,800 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen higher at 10-0 yuan/mt.

Nickel: The most-active SHFE 2106 nickel contract rose 0.44% to close at 121,350 yuan/mt on Thursday. Open interests fell 12,000 lots to 142,000 lots. Whether the contract could maintain upward trend and move above 121,300 yuan/mt will be monitored today.

Lead: Three-month LME lead settled 0.21% higher at $1,937/mt on Thursday. LME lead stocks fell 1,575 mt to 119,500 mt. Whether the contract could stand firm above $1,930/mt will be monitored today.

The most-active SHFE 2104 lead contract went down 0.4% to close at 14,970 yuan/mt on Thursday night. Whether the contract could move above 15,000 yuan/mt will be monitored today.

Tin: Three-month LME tin closed down 0.26% at $25,145/mt on Thursday. The US dollar index rose to a four-month high, after the poor auction results of 7-year US Treasury bonds pushed the yield of US bonds higher. The US dollar has been rising slightly in the past few days, and the current view is that the US dollar remains high. Affected by macro factors such as the US dollar, the trend of the contract will be under pressure in the near term. Pressure above will be seen from $26,000 /mt today. Support below will be seen from $24,600/mt today.

The most-liquid SHFE 2105 tin contract fell 0.13% to end at 169,910 yuan/mt on Thursday night. Affected by the decline of LME tin and less-than-expected domestic downstream consumption, SHFE tin weakened under inventory pressure, and it is expected that the contract will trade weakly in the near term. Pressure above will be seen from 180,000 yuan/mt today. Support below will be seen from 168,000 yuan/mt today.