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SMM Morning Comments (Oct 28): Base Metals Fell across the board under Government Curb on Coal Prices
Oct 28, 2021 10:03CST
Source:SMM
Shanghai base metals all trended downward after opening on Thursday morning amid risk aversion sentiments and China’s curb on the coal prices. Meanwhile, their counterparts on LME all went down.

SHANGHAI, Oct 28 (SMM) – Shanghai base metals all trended downward after opening on Thursday morning amid risk aversion sentiments and China’s curb on the coal prices. Meanwhile, their counterparts on LME all went down.

LME metals all fell in the trading on Wednesday. Copper dropped 1.93%, aluminium fell 5.88%, lead lost 1.99%, and zinc decreased 1.47%.

SHFE metals dropped across the board in the overnight trading on Wednesday. Copper fell 1.65%, aluminium decreased 3.33%, lead dropped 2.16%, and zinc lost 1%.

Copper: Three-month LME copper opened at $9,600/mt on Wednesday night and closed 1.93% lower at $9,573/mt after hitting the lowest point at 9,507.5/mt. LME copper is expected to trade between $9,480-9,580 yuan/mt today. The trading volume stood at 14,000 lots, and the open interest reached 267,000 lots.

The SHFE 2111 copper contract opened at 70,640 yuan/mt and fluctuated lower to hit the lowest point at 70,030 yuan/mt, then rose to 70,740 yuan/mt. The contract settled at 70,420 yuan/mt, down 1.65%, and it is expected to trade between 70,000-70,600 yuan/mt, with spot premiums between 220-380 yuan/mt. The trading volume was 16,000 lots, and the opening interest reached 68,000 lots.

The Bank of Canada announced yesterday that it would end the quantitative easing of debt purchases and advance its interest rate hike to the second quarter of next year at the earliest. The market is increasingly concerned about the expectations of global monetary policy tightening. The coal prices fell to a one-month low. Amid the market risk aversion sentiments, copper futures fell overnight. In the spot market, some downstream users are restocking at the lower prices, but the continuous inflow of imported goods is weighing on the supply.

Aluminium: Three-month LME aluminium opened at $2,835/mt on Wednesday morning and closed at $2,665.5/mt, down $166.5/mt or 5.88%.

Overnight, the most-traded SHFE 2112 aluminium contract opened at 20,000 yuan/mt, with the lowest price at 19,355 yuan/mt before closing at 19,465 yuan/mt, down 670 yuan/mt or 3.33%.

On the supply side, aluminium smelters in Guizhou, Chongqing, Henan and some other regions are still subject to production reductions. The current high costs have incurred losses on some smelters, discouraging smelters from resuming production. The supply is unlikely to increase in the short term, and the domestic consumption has improved slightly. However, the recent decline in coal prices and growing aluminium social inventory will weigh on aluminium prices.

Lead: LME lead opened at $2,422.5/mt last night and stood at over $2,400/mt at first, then it fell amid the news of China’s regulation on the coal prices to hit the lowest level at $2,364/mt. It closed at $2,367/mt, down 1.99%.

The most traded SHFE 2112 lead contract opened at 15,805 yuan/mt, and plunged 2.16% to end at 15,630 yuan/mt as the plummeting coal prices dragged down the non-ferrous metals prices. The open interest increased by 4,704 lots from the previous day to 56,372 lots.

Zinc: Three-month LME zinc fell 1.47% to settle at $3,348/mt last night, with open interest increasing 276 lots to 255,000 lots. Zinc stocks across LME-listed warehouses dropped by 1,400 mt or 0.71% to 196,625 mt. Putin asked Gazprom to increase the natural gas reserves of underground facilities in Europe, which is likely to alleviate the energy shortage in Europe to a certain extent. LME zinc is expected to move between $3,280-3,330/mt today.

The most-traded SHFE 2112 zinc contract fell 1% to settle at 23,665 yuan/mt in overnight trading, with open interest down 2,451 lots to 85,140 lots. The current supply and demand of zinc are both weak. Zinc prices weakened amid rising inventory. However, the current zinc price has fallen below the comprehensive cost of overseas smelters. The production situation of overseas smelters is expected to provide bottom support for zinc prices. The most-traded SHFE 2112 zinc contract is expected to move between 23,000-23,500 yuan/mt and domestic #0 Shuangyan will be seen at flat against the November contract.

Tin: Overnight, the SHFE 2112 tin contract hit the limit down. Market inventories are still at a low level and there is no obvious sign of inventory accumulation. Spot premiums remain high. The power rationing has triggered expectations of weaker supply and demand. The long-term demand will remain strong as the impact of power rationing weakens. The general downturn in the commodity market dragged down tin prices. Tin prices have completed technical corrections following the sharp decline. The entry of shorts is short-term speculation.

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