SMM Morning Comments (Sep 7): Base Metals Trending Mixed in the Quiet Market

SHANGHAI, Sep 7 (SMM) – Shanghai base metals trended mixed on Tuesday morning without significant bullish or bearish influential factors in the market. Meanwhile, their counterparts on LME mostly fell.

LME metals closed mixed in the trading on Monday. Copper dropped 0.17%, lead fell 1.07%, aluminium increased 1.26%, and zinc rose 0.63%.

SHFE metals performed similarly in the overnight trading. Copper gained 0.29%, zinc rose 0.02%, aluminium lost 0.12%, lead fell 0.83%, and nickel slid 0.52%.

Copper: Three-month LME copper dropped 0.17% to end at $9,454/mt on Monday night, and is expected to trade between $9,400-9,500/mt today.

The most-traded SHFE 2110 copper contract gained 0.29% last night to close at 69,580 yuan/mt, and is expected to trade between 69,400-70,000 yuan/mt today, with spot premiums between 80-180 yuan,

US market was closed for the US Labour Day holiday yesterday, and US dollar index fell from a high level. Copper futures continued to fluctuate. Saudi Arabia lowered prices for Asian buyers which is likely to trigger fierce competition among oil-producing countries, and the spread of the COVID-19 pandemic may curb the demand. Crude oil extended its downward trend yesterday, but copper futures were not affected much.

Spot prices fluctuated around the Bollinger Middle Rail, suppressing downstream purchases, and most buyers were wait-and-see. Social inventory of copper in Shanghai increased lightly in the short term with the continuous inflow of imported copper, and the BACK structure between current and forward month contracts expanded to about 200 yuan/mt yesterday. Traders undersold goods, and spot premiums plummeted. If the premiums fall to 60-80 yuan/mt, traders may be more willing to buy long-term orders. The consumption of imported copper will affect the premiums trend.

Aluminium: Three-month LME aluminium opened at $2,737/mt on Monday morning and ranged between 2,734-2,782/mt before closing at $2,767.5/mt, an increase of $34.5/mt or 1.26%. Trading volume was 14,892 lots, and open interest increased by 5,202 lots to 651,000 lots.

The most-traded SHFE 2110 aluminium contract opened Monday’s night session at 21,675 yuan/mt, with the highest and lowest prices at 21,800 yuan/mt and 21,620 yuan/mt before closing at 21,705 yuan/mt, down 25 yuan/mt or 0.12%. Trading volume was 105,000 lots, and open interest decreased by 4,233 lots to 294,000 lots.

Market will continue to pay attention to macro measures to curb excessive increase in aluminium prices, energy consumption control policies in various regions, demand in the peak season, and the impact of political turmoil in Guinea on alumina market.

Lead: Three-month LME lead fell 1.07% to close at $2,271/mt on Monday night on higher inventories and strengthened US dollar in the European session. Lead stocks across LME-listed warehouses increased slightly for two consecutive trading days, and the increment may came from the arriving cargoes exported from China. If the market sees no other bullish factors in the short term, LME lead may continue to move below the Bollinger Middle Rail.

The most active SHFE 2110 lead contract was dragged down by LME lead and closed 0.83% lower at 14,940 yuan/mt in the overnight trading yesterday.

Zinc: Three-month LME zinc rose 0.63% to $3,018/mt, with open interest increasing 2,796 lots to 254,000 lots. Zinc stocks across LME-listed warehouses dropped by 450 mt or 0.19% to 235,775 mt. The US Dollar Index rose 0.1% to 92.2235. European stock markets almost hit a record high. Technology stocks led the gains. LME zinc prices are expected to stand at $2,970-3,020/mt.

The most-traded SHFE 2110 zinc contract settled 0.02% higher at 22,475 yuan/mt on last Friday night. Total zinc inventories across seven Chinese markets stood at 122,100 mt as of September 6, down 1,500 mt from September 3 and 3,900 mt from August 30. Domestic stocks fell slightly and zinc ingot inventories failed to accumulate in the short term, supporting zinc prices. However, domestic output showed a recovery growth month on month in September while the third batch of government stockpiles will arrive this Friday, suppressing zinc prices. The SHFE 2110 contract is expected to move between 22,200-22,600 yuan/mt today and spot premiums for domestic #0 Shuangyan will be seen at 220-240 yuan/mt against the October contract. 

Nickel: The most active SHFE 2110 nickel contract slid 0.52% to end at 146,620 yuan/mt last night.

At the same time, the most traded SHFE stainless steel contract rose to the daily limit in the late trading. Market sentiment was boosted by the expectations of production cuts and tight supply. The lower stainless steel production means the weaker demand for nickel, which will drag down nickel prices. However, the impact of lower stainless steel production is insignificant, as the demand for nickel by new energy sector is still growing. Therefore, in addition to the large fluctuations brought about by market sentiments, nickel nickel market doesn’t have obvious bullish ore bearish factors. It is expected that nickel prices will continue to fluctuate widely today. Today’s focus will be the support from 145,000 yuan/mt.

Tin: SHFE tin traded rangebound during Monday’s night session. Expectations of more supply and downstream dip-buying kept prices moving sideways. The most-traded SHFE tin contract is expected to meet resistance at 248,000 yuan/mt and find support at 243,500 yuan/mt on Tuesday.