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SMM Morning Comments (Sep 16): Base Metals Rebounded as US Dollar Weakened

iconSep 16, 2021 09:58
Shanghai base metals basically rose across the board on Thursday morning on dipping US dollar index. Meanwhile, their counterparts on LME were trending mixed.

SHANGHAI, Sep 16 (SMM) – Shanghai base metals basically rose across the board on Thursday morning on dipping US dollar index. Meanwhile, their counterparts on LME were trending mixed.

LME metals mostly cruised higher in the trading on Wednesday day or night. Copper gained 1.87%, aluminium rose 2.08%, zinc went up 0.95%, while lead fell 1.02%.

SHFE metals performed similarly on Wednesday night. Copper won 1.09%, aluminium increased 2.02%, zinc rose 0.29%, while lead dropped 0.68%.

Copper: Three-month LME copper gained 1.87% on Wednesday night to close at $9,608/mt after hitting the highest price at $9,646/mt, and is expected to trade between $9,550-9,630/mt today. The open interest reached 257,000 lots.

The most-traded SHFE 2110 copper contract gained 1.09% last night to close at 70,540 yuan/mt after hitting high at 70,850 yuan/mt and fluctuating around 70,600 yuan/mt. The contract is expected to trade between 70,400-71,000 yuan/mt today, with spot premiums between 20-160 yuan/mt.

US dollar index fell to 92.48 amid weaker-than-expected US inflation data on Wednesday, and copper futures rebounded. At the same time, investors' concerns about slowing economic growth have eased, and the US stock market has recorded its biggest gain in nearly three weeks.

On the last trading day before the contract settlement, the market performance fully highlighted the difference between the supply and demand sides. The price difference between high-quality copper and standard-quality copper continued to expand to more than 150 yuan/mt due to the short-term shortage of resources. Standard-quality copper holders were hard to keep the premiums around 150 yuan/mt after the contract settlement amid the sluggish purchase.  However, holders are not willing to lower the premiums to below 100 yuan/mt before the Mid-Autumn Festival, especially when the market prices rebounded. Before the Mid-Autumn Festival, the holders are expecting a certain amount of downstream purchase so today's spot premiums may be held firm.

Aluminium: Three-month LME aluminium opened at $2,831.5/mt on Wednesday morning and ranged between 2,829-2,924/mt before closing at $2,890/mt, an increase of $59/mt or 2.08%. Trading volume was 19,000 lots, and open interest decreased by 5,968 lots to 650,000 lots.

The most-traded SHFE 2110 aluminium contract opened Wednesday’s night session at 22,570 yuan/mt, with the highest and lowest prices at 23,035 yuan/mt and 22,570 yuan/mt before closing at 22,730 yuan/mt, up 450 yuan/mt or 2.02%. Trading volume was 241,737 lots, and open interest increased by 463 lots to 160,000 lots.

Expectations of falling supply remained the major driver behind higher prices. Downstream buyers remain on the sidelines amid volatile aluminium prices. SHFE aluminium prices will see limited downside room.

Lead: Three-month LME lead opened at $2,262/mt last night, with the lowest and highest prices at $2,213/mt and $2,267/mt respectively, and closed 1.02% lower at $2,238/mt. The rebounding price of LME lead was limited against the stabilised US dollar, and the closing price fell for the third consecutive night. SMM will monitor whether the prices can rebound to $2,250/mt today.  

The most-liquid SHFE 2110 lead contract fell 0.68% to end at 14,620 yuan/mt in the overnight trading, after briefly hitting the highest point at 14,740 yuan/mt and dropping to the lowest level at 14,615 yuan/mt. Today’s focus will be whether the price can stabilise around 14,600 yuan/mt.

Zinc: Three-month LME zinc rebounded on Wednesday, closing at $3,073/mt, up $29/mt or 0.95%. Open interest increased by 182 lots to 259,000 lots. Three-month LME zinc is expected to move at $3,020-3,070/mt on Thursday. 

The most-traded zinc contract hovered around 22,620 yuan/mt during Wednesday’s night session, and closed at 22,640 yuan/mt, up 65 yuan/mt or 0.29%. Open interest decreased by 2,049 lots to 78,321 lots. The most-traded zinc contract is expected to move within a range of 22,400-22,900 yuan/mt today. Domestic Shuangyan zinc will trade at premiums of 180-200 yuan/mt over the SHFE front-month zinc contract.

Nickel: Due to the power rationing and production restrictions, the production of NPI and stainless steel in Jiangsu, Guangdong and other regions were restricted. SHFE stainless steel contract hit a new high and rose to the limit in the overnight trading yesterday.

SHFE nickel contract rose close to 150,000 yuan/mt last night, and then fluctuated within a narrow range around the 5-day moving average before closing at 148,500 yuan/mt.

The production curtailment in NPI was more significant than in stainless steel, so the NPI supply was tight, causing some steel mills to purchase nickel plates or scraps to supplement raw materials. Prices of nickel and stainless steel are expected to keep rising amid the production restrictions.

Tin: SHFE tin hit a new high 261,420 yuan/mt during Wednesday’s night session. Tin supply is expected to remain ample. Some downstream solder companies see little possibility of strong demand in the electronics industry in the peak season this year. Downstream companies expect a month-on-month increase in output in September, but the growth rate may be lower than expected. It remains to be seen whether demand is strong enough to digest supply.  

The most-traded SHFE tin contract is expected to test resistance at 262,000 yuan/mt and find support at 259,000 yuan/mt on Thursday.

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