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SMM Morning Comments (Oct 27): Base Metals All Fell under Strengthening US Dollar
Oct 27, 2021 10:04CST
Source:SMM
Shanghai base metals basically trended downward on Wednesday morning after US dollar hit a new high since October 18. Meanwhile, their counterparts on LME all cruised higher.

SHANGHAI, Oct 27 (SMM) – Shanghai base metals basically trended downward on Wednesday morning after US dollar hit a new high since October 18. Meanwhile, their counterparts on LME all cruised higher.

LME base metals all closed lower in the trading on Tuesday. Copper fell 0.82%, aluminium dropped 2.23%, and lead decreased 0.82%.

SHFE base metals fell across the board in the overnight trading. Copper fell 0.73%, aluminium dropped 2.47%, lead lost 0.75%, and nickel decreased 1.12%.

Copper: Three-month LME copper opened at $9,800/mt last night and fluctuated upward to the highest level at $9,873/mt, before slid to the lowest level at $9,735/mt. LME copper closed at $9,762/mt, down 0.82%, and is expected to trade between $9,740-9,840/mt today. The trading volume was 9,476 lots last night, and the open interest reached 265,000 lots.

The SHFE 2111 copper contract opened at 72,130 yuan/mt in the overnight trading on Tuesday and fluctuated downward to the lowest level at 71,510 yuan/mt before closing at 71,690 yuan/mt, down 0.73%. SHFE copper is expected to trade between 71,600-72,200 yuan/mt today, with spot premiums at 240-430 yuan/mt. The trading volume was 17,000 lots, and the open interest reached 79,000 lots last night.

Before the upcoming Fed meeting on interest rates, the market paid more attention to whether there would be an early interest rate hike signal. The US dollar index fluctuated within a narrow range and eventually rose 0.15%, hitting a new high at 94.02 since October 18, weighing on the copper futures. The plunge in the coke prices also dragged down the metals prices. The premiums across China pulled back yesterday. As the long-term order transaction came to an end, the overall market activity decreased, and the inflow of imported copper resulted in a slight drop in the premiums.

Aluminium: Three-month LME aluminum opened at $2,893/mt on Tuesday morning and closed at $2,832/mt, down $64.5/mt or 2.23%.

Overnight, the most-traded SHFE 2112 aluminum contract opened at 21,115 yuan/mt, with the lowest price at 20,620 yuan/mt before closing at 20,725 yuan/mt, down 525 yuan/mt or 2.47%.

Lead: Three-month LME lead opened at $2,435/mt last night, and closed 0.82% down at $2,415/mt, dragged down by the SHFE lead. The lead stocks across the LME-listed warehouses fell slightly.

The most traded SHFE 2112 lead contract opened at 16,105 yuan/mt in the overnight trading, and fell 0.75% to close at 15,970 yuan/mt as the shorts entered the market intensively with the expectations of the smelters’ work resumption. The open interest increased 1,807 lots to 48,955 lots.

Zinc: Three-month LME zinc started yesterday on a weaker foot, but rose to $3,445/mt during the night session before falling back.

Overnight, SHFE zinc toughed an intra-day low of 24,105 yuan/mt, but found support in the middle of Bollinger Bands.

Growing inventories led to market pessimism over consumption. The current zinc price has fallen below the cost of overseas smelters, and it is necessary to pay attention to the production of overseas smelters, which is expected to provide support for zinc prices. There will be limited room for further decline in zinc prices in the short term.

LME zinc is expected to move between $3,370-3,420/mt on Wednesday, and the most-traded SHFE 2112 zinc contract is expected to move between 23,800-24,300 yuan/mt.

Nickel: The SHFE 2111 nickel contract closed opened at 152,060 yuan/mt and closed at 150,640 yuan/mt in the overnight trading, down 1,700 yuan/mt or 1.12%. Trading volume was 228,000 lots, and the open interest decreased by 5,325 lots to 42,000 lots.

The nickel prices fluctuated without significant fundamental disturbance. The supply and demand are both strong, and the nickel supply mainly comes from the imports, which keeps increasing. Despite the disturbance of the power rationing on the downstream consumer side, the stainless steel and new energy industries still maintain high demand for pure nickel. Many steel mills have increased the application rate of the refined nickel due to the shortage of NPI, and some mills turned to purchase nickel briquette due to the tight supply of nickel plates. The nickel sulphate output is expected to increase on the month in October. The nickel prices have strong support from the high supply and demand, and have better decline resistance than the other metals.

Tin: Overnight, the SHFE 2112 tin contract moved within a narrow range. Market inventories are still at a low level and there is no obvious sign of inventory accumulation. The power rationing has triggered expectations of weaker supply and demand. China has maintained a net export of tin ingots. The current supply and demand remain largely balanced, while the long-term demand will remain strong as the impact of power rationing weakens. The short-term price trend is likely to remain volatile. In the long run, the prices will remain bullish as demand improves after the impact of the power rationing fades.

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