SMM Morning Comments (Jul 29): Shanghai Base Metals Trending Mixed after Obscure Fed Meeting Results

SHANGHAI, Jul 29 (SMM) — Shanghai base metals traded mixed after opening on Thursday morning, as Fed failed to set a timeline for tapering asset purchase, and COVID-19 pandemic made a comeback. Meanwhile, their counterparts on LME mostly went up.

LME metals closed mixed on Wednesday. Copper shed 1.32%, aluminium increased 1.45%, lead rose 0.49%, and zinc fell 0.13%.

SHFE metals basically weakened last night. Copper fell 1.08%, lead dropped 0.41%, zinc decreased 0.18%, tin slid 0.32%, and nickel shed 0.22%, while aluminium gained 0.51%.

Copper: Three-month LME copper dropped 1.32% on Wednesday to close at $9660/mt, and is expected to trade between $9,630-9,710/mt today.

The most-traded SHFE 2109 copper contract went down 1.08% to close at 71,320 yuan/mt in overnight trading, and is expected to trade between 71,000-71,600 yuan/mt today, with spot premiums between 240-350 yuan/mt.

Fed Chairman Jerome Powell cautioned in a press conference that although the economy is making progress toward its goals, it has a way to go before the central bank would actually adjust its easy policies. Fed kept its benchmark interest rate unchanged, and the market's dovish expectations were fulfilled. The market saw scarce long-term order transactions on the penult trading day in July. As futures prices fluctuated widely at high levels, downstream buyers started to wait and see, and the inquires were few. The low inventory in Shanghai can still support premiums to stabilise around 240 yuan/mt.

Aluminium: Three-month LME aluminium closed 1.45% higher at $2,521/mt on Wednesday, with open interest decreasing 943 lots to 668,000 lots, and is expected to trade between $2,500-2,550/mt today.

The most-active SHFE 2109 aluminium contract increased 0.51% to end at 19,555 yuan/mt last night, with open interest down 403 lots to 262,000 lots, and is expected to trade between 19,200-19,600 yuan/mt today.

Low inventories supported aluminium prices. Attention needs to be paid to the impact of the transportation clearing in Henan on the arrivals in east and central China. The impact of macro funds on base metals prices is also worth attention.

Lead: Three month LME lead gained 0.49% to close at $2,345/mt on Wednesday amid the weak US dollar. The focus today will be whether LME lead can maintain the upward trend and stabilise at the 10-day moving average.

The most-active SHFE 2109 lead contract lost 0.41% to close at 16,935 yuan/mt in the overnight trading yesterday. Bears further reduced positions, and the prices may fluctuate around 16,000 yuan/mt recently. Today’s focus will be the support of the 20-day moving average.

Zinc: Three-month LME zinc dipped 0.13% to settle at $2,968/mt on Wednesday, with open interest increasing 350 lots to 250,000 lots. Zinc stocks across LME-listed warehouses dropped by 50 mt or 0.02% to 246,950 mt. LME zinc is expected to trade between $2,940-2,990/mt today, amid the risks of Delta variant virus and Fed’s optimistic policy statement.

The most-liquid SHFE 2109 zinc contract lost 0.18% to settle at 22,270 yuan/mt in the overnight trading after bulls entered the market, with open interest decreasing 1671 lots to 99,272 lots. SHFE zinc remained weak in the unchanged fundamentals. Recent typhoon and the outbreak of pandemic in China had limited impact on the market sentiment, but the bidding for the second batch of national zinc reserves may disturb the market moods. The changes in inventories is worth attention in the short-term. The September contract is expected to move between 22,000-22,500 yuan/mt today, and spot premiums for domestic 0# Shuangyan zinc will be seen at 150-170 yuan/mt against the August contract.

Tin: The most traded SHFE 2109 tin contract slid 0.32% to end at 230,030 yuan/mt last night.       

Today’s focus will be the impact of the Fed meeting on the funds in the market. SHFE tin is expected to trade between 228,000-231,500 yuan/mt.

Nickel: The most traded SHFE 2109 nickel contract shed 0.22% to end at 146,360 yuan/mt in the overnight trading, with open interest down 2,402 lots to 152,000 lots. SHFE nickel contract is expected to be rangebound between 145,000-149,000 yuan/mt today.