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SMM Morning Comments (Sep 27): Base Metals Mostly Went Up under Dual Control Policy

iconSep 27, 2021 10:00
Shanghai base metals trended mixed on Monday morning under China’s intensifying dual control policy. Meanwhile, their counterparts on LME basically rose.

SHANGHAI, Sep 27 (SMM) – Shanghai base metals trended mixed on Monday morning under China’s intensifying dual control policy. Meanwhile, their counterparts on LME basically rose.

LME metals mostly closed higher in the intraday or overnight trading last Friday. Copper advanced 0.82%, aluminium decreased 0.91%, lead rose 1.19%, and zinc rose 0.7%.

SHFE metals performed similarly last Friday night. Copper edged up 0.8%, aluminium dropped 1.06%, lead rose 1.71%, and zinc increased 0.92%.

Copper: Three-month LME copper advanced 0.82% to close at $9,355/mt last Friday night, and is expected to trade between $9,350-9,440/mt today. The open interest reached 261,000 lots.

The SHFE 2111 copper contract edged up 0.80% to settle at 69,430 yuan/mt last Friday night, and is expected to trade between 69,300-69,900 yuan/mt today, with the spot premiums between 260-380 yuan/mt. The open interest reached 106,000 lots.

On the macro front, Fed officials’ remarks fueled the expectations of asset purchase reduction. The market’s concerns about inflation made the US dollar index strengthen on Friday night, which suppressed copper prices to a certain extent. However, copper prices stood high with the fundamental support. According to SMM survey, China’s copper inventory across the major consumption areas fell by 8,500 mt on the week to 103,500 mt, setting a new low in 2021, which supported the copper prices. In addition, many places in China have recently implemented power rationing under the government's dual control policy, and some smelters have been affected. SMM will follow the impact of the electricity rationing on the supply and demand as well as the restocking before the National Day holiday. The Fed's permanent vote committee, Yellen, and the chairman of the European Central Bank all have important speeches this week, and the signals disclosed in the speeches will influence the market risk appetite. The spot transaction was quiet last Friday with few purchases amid the risk aversion sentiment. The quotations will be switched to over the 2110 contract, and the premiums are expected to stand lower.

Aluminium: Three-month LME aluminium opened at $2,968/mt last Friday and closed at $2,929/mt, a decrease of 0.91%.

The most-traded SHFE 2111 aluminium contract opened at 23,150 yuan/mt during last Friday’s night session and moved between 22,860-23,150 yuan/mt before closing at 23,960 yuan/mt, down 245 yuan/mt, or 1.06%.

Lead: Three-month LME lead opened at $2,139/mt last Friday, and basically moved between $2,130-2,140/mt in the intraday trading. The longs increased positions intensively, which coupled with the expectations of tighter supply under China’s dual control boosted LME lead to hit the highest level at $2,172/mt, before closing at $2,166.5/mt, up 1.19%. LME lead broke through the 5-day moving average and stabilised, moving closer to the 10-day moving average. 上

The SHFE 2110 lead contract opened at 14,460 yuan/mt last Friday night, and rose to the highest level at 14,600 yuan/mt before closing at 14,550 yuan/mt, up 1.71%. As the traders intensively reduced the positions of the 2110 contract, the SHFE 2111 contract became the most active contract, of which the open interest down 823 lots to 54,404 lots.

Zinc: Three-month LME zinc rose 0.7% to $3,112/mt, with open interest increasing 3,580 lots to 265,000 lots. Zinc stocks across LME-listed warehouses dropped by 1,725 mt or 0.79% to 217,175 mt. The output at Dutch smelters declined amid rising power prices, which provided momentum for rising zinc prices. LME zinc prices are expected to move between $3,080-3130/mt today.

The most-traded SHFE 2111 zinc contract rose 0.92% or 210 yuan/mt to 23100 yuan/mt, with open interest increasing 12,902 lots to 105,147 lots. SHFE zinc prices trended higher amid bullish overseas markets. The output of zinc ingots at smelters are expected to be flat from August, boosting bullish sentiment. The consumption has also been affected by power rationing. The fourth batch of government stockpiles remains as the amrket focus. The most-traded SHFE 2111 zinc contract is expected to move between 22,700-23,200 yuan/mt and spot premiums for domestic #0 Shuangyan will be seen at 120-150 yuan/mt against the October contract.

Nickel: SHFE nickel prices settled at 145,550 yuan/mt last night. Trading volumes stood at 258,000 lots, and open interest decreased 1,638 lots to 53,355 lots. The gains in SHFE nickel prices were driven by bears reducing their positions.

At present, power rationing and production restrictions in various places have kept the market demand uncertain. SHFE nickel prices are expected to move rangebound between 141,000-148,000 yuan/mt.

Tin: SHFE tin hit a new high of 290,000 yuan/mt during last Friday’s night session. Smelters are still not willing to produce, leaving inventory at a low level and the spot market tight. The downstream solder industry has improved, but whether the photovoltaic industry will continue to grow in the future is worthy of attention. With approaching delivery of the 2110 contract, longs may inflate prices before they take profits at highs. The most-traded SHFE tin contract is expected to challenge resistance at 295,500 yuan/mt and find support at 285,000 yuan/mt today.

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