SMM Morning Comments (Sep 14): Base Metals Fell across the Board under Strengthened US Dollar

SHANGHAI, Sep 14 (SMM) – Shanghai base metals all edged down on Tuesday morning amid strengthened US dollar index. Meanwhile, their counterparts on LME basically trended lower as well.

LME metals all went down in the trading on Monday. Copper dropped 1.56%, aluminium fell 1.35%, lead lost 0.67%, and zinc decreased 0.93%.

SHFE metals also fell across the board last night. Copper fell 1.82%, aluminium dropped 2.82%, lead decreased 0.6%, and zinc lost 1.08%.

Copper: Three-month LME copper opened at $9,679/mt last night and fell to $9,472/mt before rebounded to close at $9,536/mt, a decrease of 1.56%. LME copper is expected to trade between $9,500-9590/mt today.

The most-traded SHFE 2110 copper contract fell 1.82% on Monday night to close at 70,180 yuan/mt, and is expected to trade between 69,900-70,500 yuan/mt today, with spot premiums between 20-90 yuan/mt.

On the macro front, the United States will announce the Consumer Price Index (CPI) data on Tuesday. The market is worried that the CPI data will remain high. Fed may reduce asset purchases before the end of this year. Risk aversion sentiments drove up US dollar index and suppressed copper futures.

Futures prices soared on Monday, and spot holders undersold goods with significantly lower prices, with premiums turning to discounts. However, downstream inquires were scarce, and the Backwardation structure in the intraday trading returned to 200 yuan/mt. The overall market transaction was sluggish.

Aluminium: Three-month LME aluminium opened at $2,921/mt last night and hit a highest level at $3,000/mt before dropping to the lowest point at $2,858/mt. LME aluminium closed at $2,888/mt in the overnight trading, down 1.35%, with the open interest up 6,774 lots to 655,000 lots.

The most-traded SHFE 2110 aluminum contract opened at 23,505 yuan/mt last night, with the highest and lowest prices at 23,530 yuan/mt and 22,535 yuan/mt before closing at 23,710 yuan/mt, down 660 yuan/mt or 2.82%.

Trading volume was 359,625 lots, and open interest decreased by 22,320 lots to 212,000 lots.

Aluminium prices still have upward momentum amid the expectations of tighter supply due to the dual control of energy consumption, power shortage, and coal shortage.

SMM will monitor whether this Friday’s meeting on ensuring supply and stabilising prices of coal can loosen the supply, and the lower operating rates on the end consumption side is worth attention.

Zinc: Three-month LME zinc dropped 0.93% in the overnight trading yesterday to close at $3,079/mt, with open interest up 1,207 lots to 261,000 lots.

Zinc stocks across LME-listed warehouses increased by 4250 mt or 1.87% to 231,150 mt overnight.

US dollar index rose to a two-week high boosted by expectations that the Fed may reduce asset purchases before the end of this year. LME zinc prices are expected to stand at $3,040-3,080/mt in the short term.

The most-liquid SHFE 2110 zinc contract decreased 240 yuan/mt or 1.08% to settle at 22,750 yuan/mt in the overnight trading, with open interest down 11,718 lots to 181,000 lots.

Domestic zinc supply increased significantly as the output rose 11,800 mt in September and 50,000 mt of national reserve was released. National zinc inventory is expected to rise after the national reserves are received by downstream users. Meanwhile, downstream consumption remained flat, weighing on zinc prices. The SHFE 2110 contract is expected to move between 22,400-22,800 yuan/mt today, and spot premiums for domestic 0# Shuangyan zinc will be seen at 210-220 yuan/mt against the October contract.

Lead: Three-month LME opened at $2,304/mt last night, and lost 0.67% to close at $2,287.5/mt after hitting a low level at $2,269/mt. Longs left market with profits last night, and lead stocks across LME-listed warehouses increased slightly, making LME lead to fall into a wide negative range after the gains in two consecutive nights. SMM will monitor the support from 5-day, 10-day, and 20-day moving averages.

The most-liquid SHFE 2110 lead contract opened at 15,090 on Monday night, and was dragged down by LME lead to 14,870 yuan/mt before closing at 15,000 yuan/mt, a decrease of 0.6%. Today’s focus will be the support from 15,000 yuan/mt.

Tin: The most traded SHFE tin contract fell to 253,000 yuan/mt in the overnight trading on Monday and fluctuated in a narrow range until the closing. Marked tin supply is expected to be sufficient amid the stable production and the opened import window. According to some from some downstream solder companies, the end consumption of electronics industry seems flat in the traditional peak season, but the output is not affected. Whether the actual growth in demand can digest the supply will be further monitored. Longs may drive up the prices again in the short term. Today’s focus will be the scale of longs that leave the market and the support from 250,000 yuan/mt. The most-traded SHFE tin contract is expected to meet resistance at 257,000 yuan/mt and find support at 250,000 yuan/mt on Monday.

Nickel: The most traded SHFE nickel contract opened at 149,410 yuan/mt last night, and fell below the 5/10-day moving average to hit the lowest point at 146,280 yuan/mt. Then the price fluctuated around 147,000 yuan/mt until the closing.

Longs left the market with profits from the previous price hikes, and the news that Tsingshan will put high-grade nickel matte capacities into production dampened the bullish confidence, dragging down the prices significantly.

Fundamentals of refined nickel remained flat, and the news and fund game are worth attention. Today’s focus will be the support from the 20-day moving average at 145,000 yuan/mt.