SMM Morning Comments (Nov 16): Base Metals All Closed Lower after US Dollar Hit 16-Month High

SHANGHAI, Nov 16 (SMM) – Shanghai base metals basically trended lower on Tuesday morning after US dollar index hit a nearly 16-month high. Meanwhile, their counterparts on LME basically rose.

LME base metals all edged down in the trading on Monday. Copper fell 0.81%, aluminium dropped 2.32%, lead lost 1.74%, and zinc shed 0.29%.

SHFE base metals performed similarly in the overnight trading. Copper dipped 0.08%, aluminium fell 365 yuan/mt, lead decreased 0.91%, zinc fell 1.08%, and nickel lost 1.15%.

Copper: Three-month LME copper fell 0.81% last night to close at $9,667/mt after hitting the highest and lowest points at $9,743/mt and $9,621/mt respectively. The trading volume was 11,000 lots, and the open interest reached 264,000 lots. Three-month LME copper is expected to trade between $9,620-9,710 yuan/mt today.

The SHFE 2112 copper contract opened at 71,030 yuan/mt on Monday night, falling to the lowest point at 70760 yuan/mt before rebounding to the highest point at 71,220 yuan/mt, and closed at 70,880 yuan/mt, down 0.08%. The trading volume was 30,000 lots, and the open interest reached 143,000 lots. SHFE copper is expected to trade between 70,600-71,200 yuan/mt today, with spot premiums between 280-380 yuan/mt.

US dollar index hit a nearly 16-month high at 95.61, which weighed on the non-ferrous metals prices. While US President Biden formally signed the bipartisan infrastructure construction bill yesterday, which is expected to bring positive support to today's metal market. Spot holders continued to kept prices high amid tight supply on the delivery day of SHFE 2111 contract. The premiums of copper spots are expected to remain high supported by low inventory.

Aluminium: LME aluminium fell $62.5/mt or 2.32% to settle at $2,634/mt with open interest rising 4,522 lots to 708,000 lots.

The most-liquid SHFE 2112 aluminium contract decreased 365 yuan/mt to settle at 19,050 yuan/mt in overnight trading, with open interest down 9,344 lots to 143,000 lots.

The real estate data in October was general and the social stocks of aluminium ingots rose again. The domestic supply has not changed much, and the power rationing impact continued to reduce. But the shortage of chips and the sluggish real estate market also pressured on aluminium consumption. The weakening of the consumption recovery will bring about a limited increase in the destocking rate. SHFE aluminium is expected to remain fluctuating.

Lead: Three-month LME lead opened at $2,359/mt in the overnight trading on Monday, and fluctuated between $2,335-2,350/mt amid sluggish trade in the Asian session. Then the US dollar index rose to a record high since July 2020, forcing down the non-ferrous metals. LME lead fell to the lowest point at $2,315/mt and closed at $2,317.5/mt, down 1.74%. Today’s focus will be the support at $2,300/mt.

The most-liquid SHFE 2112 lead contract opened at 15,130 yuan/mt last and decreased 0.91% to settle at 15,255 yuan/mt last night, with open interest increasing 2,064 lots to 57,277 lots. SHFE lead has fallen below all the moving averages, and SMM will monitor the the support at 15,000 yuan/mt.

Zinc: Three-month LME zinc dipped 1.36% to settle at $3,222.5/mt last night, with open interest increasing by 3,099 lots to 279,000 lots. Zinc stocks across LME-listed warehouses dropped by 525 mt or 0.29% to 182,750 mt. The market expects the Fed to raise interest rates to a new high next year, leading to a tightening of market risk appetite. Zinc prices are likely to fall slightly. LME zinc is expected to move between $3,100-3,150/mt.

The most-traded SHFE zinc fell 1.08% to settle at 22,820 yuan/mt, with open interest falling 5,915 lots to 54,745 lots. The market is expected to see oversupply of zinc ingots as a medium-sized zinc smelters will commission in November, coupled with the approaching of government stockpiles. The most-traded SHFE 2112 zinc contract is expected to move between 22,300-22,800 yuan/mt today and spot premiums of domestic #0 Shuangyan will stand at 40 yuan/mt over the December contract.

Nickel: The SHFE nickel opened at 145,690 yuan/mt last night and fluctuated around 145,000 yuan/mt, before falling below the 5/10-day moving average to hit the lowest point at 142,920 yuan/mt in the late trading. SHFE nickel closed at 143,330 yuan/mt in the overnight trading, down 1,670 yuan/mt or 1.15%. The decline in domestic real estate data dragged down the market sentiments, and the nickel prices found no support from the fundamentals. The prices are expected to remain volatile.

Tin: SHFE 2112 tin contract was muted after opening, with the capital leaving the market. The inventory for warrants stabilised while spot cargoes remained tight without sharp fluctuations. Premiums quotes remained high as tin prices fell slightly. Prices congested around 280,000 yuan/mt and the investors held a wait-and-see outlook. Tin prices are expected to fluctuate at high levels amid stable supply and demand and high spot premiums. The demand is likely to keep improving.