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SMM Morning Comments (Jul 27): Shanghai Base Metals Basically Cruised Higher with Dovish Expectations
Jul 27,2021 10:00CST
SMM Comments
Source:SMM
Shanghai base metals mostly increased on Tuesday morning ahead of the Fed’s monetary policy meeting with the dovish expectations. Meanwhile, their counterparts on the LME all rose.

SHANGHAI, Jul 27 (SMM) — Shanghai base metals mostly increased on Tuesday morning ahead of the Fed’s monetary policy meeting with the dovish expectations. Meanwhile, their counterparts on the LME all rose.

LME metals closed mixed in the overnight trading yesterday. Copper increased 2.41%, aluminium fell 0.16%, lead dropped 0.32%, and zinc gained 1.09%.

SHFE base metals rose across the board last night. Copper gained 2.31%, aluminium rose 0.64%, lead advanced 0.53%, zinc went up 1.1%, and tin won 1.09%.

Copper: Three-month LME copper rose 2.41% to end at $9,855.5/mt on Monday night, and is expected to trade between $9,780-9,880/mt today.

The most-traded SHFE 2109 copper contract advanced 2.31% to close at 72,170 yuan/mt in overnight trading, and is expected to trade between 71,800-72,500 yuan/mt today, with spot premiums between 220-350 yuan/mt.

At the macro level, the market is still waiting for the Fed’s monetary policy meeting this week. Under the background that the job market has not reached the Fed’s target, dovish expectations have caused the dollar index to fall back, which has boosted the rise of copper prices.

Fundamentally, industry support shows resilience. As of Monday July 26, the national social inventory of copper had been falling with the strong support of the replacement of copper scrap by copper cathode. In the last trading week of July, the trade of long-term orders for this month is coming to an end. Although the holders intend to raise the premiums, the buyers are reluctant to accept the high prices. Downstream users are expected to keep cautious in purchase as SHFE copper surged yesterday.

Aluminium: Three-month LME aluminium closed 0.16% lower at $2,504/mt in the overnight trading yesterday, with open interest decreasing 1,056 lots to 665,000 lots, and is expected to trade between $2,470-2,530/mt.

The most-active SHFE 2109 aluminium contract gained 0.64% to end at 19,675 yuan/mt last night, with open interest up 7,496 lots to 294,000 lots. SHFE aluminium is expected to trade between 19,100-19,800 yuan/mt today, and aluminium spot is likely to trade at discounts between 50-20 yuan/mt in east China.

The inventory decrease on Monday strongly supported aluminium prices. Attention needs to be paid to the progress of power curtailment, the floods in Henan, inventory inflexion points, and long-short.

Lead: Three-month LME lead ended 0.32% lower at $2,365/mt in the overnight trading yesterday.

US dollar fluctuated lower last night, boosting LME metals to rebound, and lead reversed part of the losses. The support from the 5-day moving average is worth attention today.

The most-liquid SHFE 2109 lead contract ended 0.53% firmer at 16,150 yuan/mt in overnight trading. Long positions further increased. Today’s focus will be the support from 16,100 yuan/mt.

Zinc: Three-month LME zinc gained 1.09% to settle at $3,011/mt last night, with open interest decreasing 480 lots to 249,000 lots. Zinc stocks across LME-listed warehouses dropped by 100 mt or 0.04% to 247,200 mt. US dollar weakened overnight, and the three major US stock indexes continued to set new highs. The market sentiment was suppressed due to the unexpected drop in US sales of new houses to the new low since April 2020. However, the US Republican Party stated that 90% of the infrastructure bill had been completed, which boosted the price to break through $3,000/mt. LME zinc is expected to fluctuate between $2,970-3,020/mt today.

The most-traded SHFE 2109 zinc contract settled 1.1% higher at 22,600 yuan/mt last night, with open interest up 18,487 lots to 106,006 lots. Long funds were boosted amid the strengthened LME zinc, ample liquidity, and the falling social inventories. Fundamental expectations weakened in margins, but the inventories stood at a historical low level. SHFE zinc is expected to fluctuate in a wide range. The September contract is expected to move between 22,200-22,700 yuan/mt today, and spot premiums for domestic 0# Shuangyan zinc will be seen at 160-180 yuan/mt against the August contract.

Tin: The most traded SHFE 2109 tin contract won 1.09% to end at 235,870 yuan/mt last night after hitting a recent high of 236,260 yuan/mt, with open interest up 3,130 lots.

The determination and sustained strength of long funds in the short term is worth attention. Fundamentals remained largely unchanged, and tin prices will continue to fluctuate higher. SHFE tin is expected to trade above 232,500 yuan/mt today.

SMM comments
Copper
Aluminium
Lead
Zinc
Tin

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