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SMM Morning Comments (Sep 13): Base Metals Rose across the Board amid Loosened Macroeconomic
Sep 13,2021 09:59CST
SMM Comments
Shanghai base metals all trended higher on Monday morning in the loosened Chinese macroeconomic environment. Meanwhile, their counterparts on LME was mixed.

SHANGHAI, Sep 13 (SMM) – Shanghai base metals all trended higher on Monday morning in the loosened Chinese macroeconomic environment. Meanwhile, their counterparts on LME was mixed.

LME metals all cruised higher in last Friday’s trading. Copper rose 3.11%, aluminium won 3.23%, lead gained 0.37%, and zinc edged up 1.07%.

SHFE metals also rose across the board last Friday night. Copper increased 2.45%, aluminium gained 2.74%, lead inched up 0.6%, and zinc settled 0.77% higher.

Copper: Three-month LME copper rose 3.11% to end at $9,687.5/mt last Friday night, and is expected to trade between $9,650-9,700/mt today.

The most-traded SHFE 2110 copper contract increased 2.45% last Friday night to close at 71,430 yuan/mt, and is expected to trade between 71,000-71,600 yuan/mt today, with spot premiums between 10-70 yuan/mt.

US August PPI released last Friday increased by 8.3% year on year, marking an upward trend for nine consecutive months. The unexpected growing data reignited the market's debate on when the Federal Reserve will call off its stimulus measures. China’s domestic capital market was relatively loose. China's August social financial data exceeded expectations with a significant month-on-month increase. The easing of the macroeconomic boosted market sentiments, and copper futures marked a high rise. Spot market trade was still dominated by traders, and some downstream users have already finished restocking at lower prices, who turned wait-and-see again. The focus of the market this week is the trend of premiums before and after the settlement September contract.

Aluminium: Three-month LME aluminium won 3.23% to close at $2,927.5/mt in the overnight trading last Friday, with open interest losing 114 lots to 648,000 lots.

The most-active SHFE 2110 aluminium contract gained 2.74% to end at 23,240 yuan/mt last Friday night, with open interest up 575 lots to 273,000 lots.

Aluminum supply across Guangxi, Guizhou, and many other regions in China has been affected by energy consumption control policy. SMM data showed that China’s social inventories of aluminium across eight consumption areas increased 2,000 mt on the week to 751,000 mt as of September 9.  Market will continue to pay attention to aluminium price control measure, inventory changes, energy consumption control policy, and actual demand in the peak season.

Lead: Three-month LME lead gained 0.37% to settle at $2,325/mt in the overnight trading last Friday. Longs increased positions of LME lead for the third consecutive trading day last Friday, boosting the prices to rise for the second consecutive day and break through the 40-day moving average. Lead stocks across LME-listed warehouses declined slower last week, which may weigh on the prices. This week's focus will be the pressure from the 40-day moving average.

The most-liquid SHFE 2110 lead contract inched up 0.60% to end at 15,160 yuan/mt last Friday night. Shorts reduced positions of SHFE lead for the third consecutive day, driving the prices up to test the 20-day moving average. SMM will monitor whether SHFE lead can stabilise around 15,150 yuan/mt today.

Zinc: Three-month LME zinc edged up 1.07% to end at $3,108/mt last Friday, with open interest up 301 lots to 259,000 lots. Zinc stocks across LME-listed warehouses dropped by 2,350 mt or 1.03% to 226,900 mt. Worsening Covid-19 pandemic and poor employment data are likely to extend the timetable for the US debt reduction. LME zinc prices are expected to move between $3,080-3,120/mt today.

The most traded SHFE 2110 zinc contract settled 0.77% higher at 23,045 yuan/mt last Friday night, with open interest up 11,301 lots to 197,700 lots. Domestic zinc supply rose sharply as output rose 11,800 mt in September, coupled with 50,000 mt of government stockpiles. Domestic inventories are expected to increase as the government stockpiles arrives at downstream plants and the downstream consumption is not bullish. There will be surplus of nearly 10,000 mt in September, pressuring on zinc prices. The SHFE 2110 contract is expected to move between 22,850-23,150 yuan/mt today and spot premiums for domestic #0 Shuangyan will be seen at 180-200 yuan/mt against the October contract.

Tin: Marked tin supply is expected to be sufficient amid the higher tin ingot output in August and the opened import window.

The electronics industry will enter the traditional peak-season, but some downstream solder companies lowered their September output plan. Therefore, whether end demand can actually grow and digest loose supply will affect the future price trends.

Long funds continued their strong performance and drove up prices.

However, this round of price rising has not seen a significant decline in the short term, and the continued increase in short positions indicates their bearish outlook.

Longs may drove up the prices for the settlement of September contract, and the prices may drop rapidly afterwards.

Nickel: The most traded SHFE nickel contract opened at 152,890 yuan/mt and closed at 153,640 yuan/mt last Friday night, marking an increase for the fourth consecutive day. At fundamentals, demand for nickel sulphate remained high, and NPI supply is expected be tight. This coupled with the low nickel inventories boosted nickel prices. SMM will monitor the nickel price trend after the bullish news is digested and the macro funds flow out.

SMM comments

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