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SMM Morning Comments (Oct 26): Base Metals Closed Mixed amid Cooled Market Sentiments
Oct 26, 2021 10:06CST
Shanghai base metals mostly trended lower on Monday morning amid cooled market sentiments. Meanwhile, their counterparts on LME mostly fell.

SHANGHAI, Oct 26 (SMM) – Shanghai base metals mostly trended lower on Monday morning amid cooled market sentiments. Meanwhile, their counterparts on LME mostly fell.

LME metals all increased in the trading on Monday. Copper gained 1.06%, aluminium rose 0.75%, lead won 0.41%, and zinc increased 0.29%.

SHFE metals closed mixed in the overnight trading. Copper increased 0.4%, lead rose 0.31%, aluminium fell 2.12%, and zinc dropped 0.73%.

Copper: Three-month LME copper gained 1.06% on Monday night to close at $9,843/mt, after hitting the lowest and highest prices at $9,771.5/mt and $9,908/mt, and is expected to trade between $9,820-9,910/mt today. The trading volume was 9,036 lots, and the open interest stood at 268,000 lots.

The SHFE 2111 copper contract opened at 72,030 yuan/mt and edged up 0.4% to end at 72,240 yuan/mt after hitting the lowest level at 71,730 yuan/mt in the overnight trading. SHFE copper is expected to trade between 72,000-72,600 yuan/mt today, with spot premiums between 280-420 yuan/mt. The trading volume was 18,000 lots, and the open interest reached 87,000 lots last night.

National Development and Reform Commission has promoted the coal production and supply and strict supervision and policy-based regulation, as well as curbed the speculation to cool the market sentiments. The domestic power rationing continued to affect the output. The import volume was stable, and the downstream consumption was moderate. However, the low domestic inventory and the falling overseas stocks supported the copper prices. Near the end of the month, as the long-term order transaction comes to an end, and the inflow of the imported copper weighs on the supply, the traders actively delivered goods at the prices over 72,000 yuan/mt. The premiums are expected to pull back gradually.

Aluminium: Three-month LME aluminium rose 0.75% to end at $2,896.5/mt on Monday.

The most-traded SHFE 2112 aluminium contract fell 2.12% to settle at 21,205 yuan/mt last night.

On the supply side, a new aluminium plant has encountered power rationing and the transportation of aluminium ingots and rods produced in northwest China has been hindered. Domestic social inventory of aluminium increased from 11,000 mt last Thursday to 968,000 mt on October 25. Compared with the 70,000 mt of weekly accumulation that was calculated last Thursday, the rate of increase has slowed down. The power rationing at some aluminium processing enterprises in Jiangsu and Zhejianghas been loosened, and downstream demand is expected to continue to rebound. Power rationing, inventory data and coal price trends remain as the market focus.

Lead: Three-month LME lead opened at $2,425.5/mt last night and hit a new high since June 15, 2018 at $2,452.5/mt. It gained 0.41% to end at $2,435/mt last night amid falling stocks.

The most active SHFE 2112 lead contract opened at 16,065 yuan/mt in the overnight trading, and reached the highest prices at 16,200 yuan/mt as many longs entered the market, before closing at 16,080 yuan/mt, up 0.31%. The open interest increased by 912 lots from the previous day to 47,032 lots.

Zinc: Three-month LME zinc rose 0.29% to settle at $3,442/mt last night, with open interest decreasing 826 lots to 256,000 lots. Zinc stocks across LME-listed warehouses gained 1,350 mt or 2.56% to 199,625 mt. The Fed Chairman Powell said that the Fed should soon start to reduce the scale of asset purchases, but will not raise interest rates yet. LME zinc is expected to move between $3,400-3,450/mt today.

The most-traded SHFE 2112 zinc contract fell 0.73% to settle at 24,570 yuan/mt in overnight trading, with open interest up 2,170 lots to 86,082 lots. Total zinc inventories across seven Chinese markets stood at 145,800 mt as of October 25, down 1,500 mt from October 22 and 1,400 mt from October18. However, due to the frequent changes of dual control and power rationing policies, coupled with government stockpiles, bringing fluctuations of supply and demand. However, low levels of zinc stocks will support zinc prices. The most-traded SHFE 2112 zinc contract is expected to move between 24,000-24,500 yuan/mt and domestic #0 Shuangyan will be seen at flat against the November contract.

Tin: SHFE 2112 tin contract stabilised. On fundamentals, the processing fee at upstream smelters increased, stimulating production enthusiasm. But refined tin is in a net export and the market inventory is at a low level. The demand side was slightly affected by power rationing. The output estimate at solder companies fell slightly MoM in October, but the long-term demand keeps positive. The supply-demand relationship is temporarily in equilibrium and long-short funds are still in the transitional stage of entry. In the long run, the price trend is likely to be bullish due to the expected good performance on the demand side and the uncertainty of the impact of the power rationing policy on the supply.

Nickel: The SHFE 2011 nickel contract consolidated at 150,000 yuan/mt during the day trading yesterday, and rebounded slightly in the evening session. From a fundamental point of view, the import volume of primary nickel has continued to increase recently. Among them, nickel briquette and hydrometallurgy intermediate products are particularly outstanding. With the continuous growth of primary nickel imports, domestic nickel-based product inventories are still at a low level, which proves that the current downstream demand is strong. However, domestic power rationing continues, which has grown market uncertainty and mainly affects the demand side.  The current nickel prices did not see obviously negative factors, and may still be strong in the short-term. The backwardation of LME cash to the three-month contract continued to rise after the National Day holidays. The nickel prices are relatively firm relative to the prices of other products. However, today's macro sentiment tends to weaken. And metals will generally fall. The nickel prices may have a slight correction today.

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