SMM Morning Comments (Nov 10): Base Metals Mostly Fell under Inflationary Pressure

SHANGHAI, Nov 10 (SMM) – Shanghai base metals mostly fell on Wednesday morning under constant inflationary pressures. Meanwhile, their counterparts on LME basically trended downward.

LME metals all closed lower in the trading on Tuesday. Copper fell 0.97%, aluminium lost 1.46%, lead fell 1.18%, and zinc dropped 0.43%.

SHFE metals mostly dropped in the overnight trading. Copper decreased 0.84%, aluminium lost 1.29%, lead fell 0.58%, nickel shed 1,890 yuan/mt, and zinc rose 0.71%.

Copper: Three-month LME copper opened at $9,684/mt on Tuesday night and closed 0.97% lower at $9,568/mt after hitting the lowest point at 9,506/mt. The trading volume stood at 12,000 lots, and the open interest reached 259,000 lots. LME copper is expected to trade between $9,500-9,600 yuan/mt today.

The most-traded SHFE 2112 copper contract opened at 70,950 yuan/mt last night, and lost 0.84% to close at 69,960 yuan/mt, after hitting the lowest level at 69,720 yuan/mt. The trading volume was 54,000 lots, and the open interest stood at 153,000 lots. SHFE copper is expected to trade between 69,800-70,400 yuan/mt today, with spot premiums between 80-260 yuan/mt.

The US October PPI data released on Tuesday continued to rise by 0.6%, indicating that the inflationary pressures still exist. The US October CPI data will be released today. The investors will gauge whether the prices will rise rapidly based on the inflation data. The market sentiments were cautious. The price spread between the November and December contracts narrowed rapidly. The holders held the prices high again amid short supply, and the users’ inquiries also supported the prices.

Aluminium: Three-month LME aluminium opened at $2,602.5/mt yesterday and closed at $2,562/mt, a decrease of 1.46%.

Overnight, the most-traded SHFE 2112 aluminium contract opened at 19,030 yuan/mt, and closed at 18,760 yuan/mt, down 245 yuan/mt, or 1.29%.

Aluminium ingot inventories are still at a high level, and the overall industrial metals prices are sluggish, which will continue to weigh on short-term aluminium prices.

Lead: Three-month LME lead opened at $2,363.5/mt last night and fell to $2,346.5/mt, then the prices rebounded to the highest level at $2,377/mt, before dropping again to close at $2,336/mt, down $28/mt or 1.18%.

The most-traded SHFE 2112 lead contract opened at 15,650 yuan/mt in the overnight trading, hitting the highest point at 15,665 yuan/mt, and closed at 15,520 yuan/mt, down 90 yuan/mt or 0.58%.

Zinc: Overnight, LME zinc fell to $3,236/mt after opening at $3,290 yuan/mt, but then rebounded to $3,315/mt before closing at $3,276/mt, down $14/mt or 0.43%. Trading volume fell to 7,612 lots, and open interest increased by 3,471 lots to 265,000 lots. LME zinc inventory decreased by 1,575 mt to 190,125 mt, a drop of 0.82%. LME zinc is expected to move between $3,230-3,280/mt on Wednesday.

Overnight, the most-traded SHFE 2112 zinc contract rose to 23,580 yuan/mt after opening at 23,310 yuan/mt, but then fell back to 22,965 yuan/mt before closing at 23,250 yuan/mt, up 165 yuan/mt or 0.71%. Trading volume increased 88,290 lots, and open interest increased by 2,184 lots to 76,592 lots. Power rationing reduced output at some smelters, but fewer arrivals due to the pandemic and slower transportation have kept supply tight. Production and transportation of downstream producers in Tianjin, Hebei and other regions have been affected by blizzards. However, downstream producers went bargain hunting, keeping social inventories still low. Low inventory will continue to support zinc prices. The most-traded zinc contract is expected to move within a range of 23,000-23,500 yuan/mt today. 0# domestic Shuangyan zinc may trade at premiums of 30-50 yuan/mt over the SHFE 2112 zinc contract.

Nickel: The SHFE 2112 nickel contract opened at 144,970 yuan/mt last night and fluctuated between 140,000-145,000 yuan/mt. It closed at 142,650 yuan/mt, down 1,890 yuan/mt. The trading volume was 133,000 lots, and the open interest stood at 100,000 lots. On the fundamentals, the nickel prices show no obvious trend, but the consumption of refined nickel is likely to weaken in margins due to slower inventory decline and stagnated spot premiums amid sufficient supply.  The prices of NPI and stainless steel have shown a downward trend due to the weakened consumption.

The nickel prices are expected to remain volatile without significant fundamental contradiction.

Tin: SHFE tin fell overnight due to entry of shorts. Warrants increased significantly, but the spot market is still tight. Quotations remain high due to the large backwardation between SHFE 2111 and 2112 contracts. Prices will hover around current levels in the short term, with little upward momentum due to increasing inventory. Strong demand in the long run will support the most-traded SHFE tin contract.