SMM Morning Comments (Nov 2): Shanghai Base Metals Closed Mixed with Tin Prices Rebounding Sharply

SHANGHAI, Nov 2 (SMM) – Nonferrous metals prices closed mixed overnight. Tin prices rebounded amid the disruptions to the supply side and low inventory. Other base metals moved rangebound.

LME copper dropped 0.45%, aluminium edged down 0.51%, lead dipped 0.34%, and zinc fell 0.77%.

SHFE copper rose 0.06%, aluminium climbed 0.07%, lead gained 0.16%, zinc lost 0.85%, and nickel climbed 1.63%.

Copper: LME copper prices dropped 0.45% to close at $9,501/mt in the overnight trading and are expected to trade at $9,460-9,540/mt. Trading volumes stood at 11,000 lots and open interest stood at 265,000 lots. The SHFE 2112 copper contract rose 0.06% last night to close at 70,280 yuan/mt, and is likely to trade between 69,800-70,400 yuan/mt today. On the macro side, the growth in the US manufacturing industry slowed in October, and supply chain bottlenecks led to record-high delivery time for raw materials. US Treasury Secretary Yellen said on Monday that the US economy has not overheated. Although the inflation is higher than in recent years, it is related to the damage caused by the pandemic. The current price increase will be temporary. The US dollar index closed down 0.24% on Monday, giving back some of the gains of the previous trading day and giving certain support to the metal market. The Fed will hold a monetary policy meeting on Tuesday and Wednesday. The focus of the market has now shifted to whether the Fed will raise interest rates in advance and the extent of the rate hike. The brisk inquiries in the morning session of the first trading day of November has boosted market trades, bolstering sellers’ confidence. The spot premiums are likely to fluctuate between 300-400 yuan/mt.

Aluminium: The most-traded SHFE 2112 aluminium contract rose 0.07% to close at 20,065 yuan/mt. Three-month LME aluminium opened at $2,742/mt yesterday and closed at $2,719.5/mt, down 0.51%. The inventory rose 21,000 mt on Monday, which mainly came from Wuxi. On the demand side, aluminium prices stabilised, but some downstream companies are still troubled by power rationing, whom held a wait-and-see outlook. Discounts stood at 100 yuan/mt in the east China market amid power rationing in the downstream producers. Coal prices may stop falling, easing the panic sentiment. At the same time, the continuous easing of power rationing will help aluminium prices to stabilise. However, the concentrated arrivals of aluminium ingots overstocked in the production areas brought about an increase in the inventory. Therefore, SHFE aluminium prices are likely to rebound limitedly.  

Zinc: Three-month LME zinc fell 0.77% to settle at $3,371.5/mt last night, with open interest decreasing 545 lots to 256,000 lots. Zinc stocks across LME-listed warehouses dropped by 600 mt or 0.3% to 196,800 mt. The manufacturing industry delivers the signs of strong demand and weak supply. The US October ISM manufacturing industry dropped to 60.8, which highlights the risk of stagflation. 
The most-traded SHFE 2112 zinc contract fell 0.85% or 205 yuan/mt to 23,850 yuan/mt, with open interest increasing 1,726 lots to 83,010 lots. The supply and demand of zinc weakened. Domestic inventory across the seven markets declined 2,900 mt. The social inventory is at low levels, supporting zinc prices. Price forecast: LME zinc prices are expected to move between $3,300-3,350/mt. The most-traded SHFE 2112 zinc contract is expected to move between 23,500-24,000 yuan/mt and domestic #0 zinc to fall 490 yuan/mt.

Lead: LME lead dipped 0.34% to settle at $2,371/mt on Monday. Yesterday, the Fed’s interest rate hike expectations in the market heated up, and the macro sentiment continued to disturb the bulk commodity market, and the non-ferrous metals were under pressure. 

The most active SHFE 2112 lead contract edged up 0.16% to settle at 15755 yuan/mt. The domestic October manufacturing PMI was issued yesterday, standing below 50 for two consecutive months. The macro front is negative for the domestic non-ferrous metal sector. However, domestic lead social stocks continued to fall slightly at the beginning of the week. This combined with the potential that the power rationing in Anhui will disrupt the recovery of seondary lead production has supported SHFE lead prices. It should be noted that due to the large difference between the futures and spot prices, market participants prefer to make deliveries. Recently, attention should be paid to whether the higher willingness to make deliveries will accumulate the inventories.

Nickel: SHFE nickel contract advanced 2,330 yuan/mt or 1.63% to end at 145,550 yuan/mt in the evening trading of Monday. 

Supply side: It was reported that the production at Jinchuan has been affected by the earthquake, but it is understood that there is little impact on the current nickel production. Demand side: the nickel prices rebounded slightly yesterday, and the downstream purchased on demand. At present, the supply of goods in the market is sufficient, and the quotation of nickel plates remains low. At present, there is not much contradiction between the supply and demand of nickel fundamentals, and the overall situation is still affected by market sentiment, maintaining a range-bound trend.

Tin: The SHFE 2112 tin contract fluctuated rangebound, with strong sentiment of leaving the market. The market supply trended lower and spot supply remained tight. The output at some smelters is expected to decline slightly amid power rationing. The demand is likely to be limited and the power rationing impact to fade away in the short term. The funds in the stock market are not much amid stable price trends. The most-active tin contract is unlikely to weaken amid low inventory and high spot premiums. The demand will increase in the long run.