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SMM Morning Comments (Nov 17): Base Metals Mostly Closed Lower amid Intensifying Expectations of Early Interest Rate Hikes
Nov 17, 2021 10:02CST
Source:SMM
Shanghai base metals basically trended lower on Wednesday morning after the expectations of early interest rate hike intensified. Meanwhile, their counterparts on LME trended mixed.

SHANGHAI, Nov 17 (SMM) – Shanghai base metals basically trended lower on Wednesday morning after the expectations of early interest rate hike intensified. Meanwhile, their counterparts on LME trended mixed.

LME metals generally fell in the trading on Tuesday. Copper fell 1.41%, aluminium lost 2.33%, lead dropped 1.62%, while zinc rose 0.47%.

SHFE metals performed similarly in the overnight trading. Copper lost 1.04%, aluminium dropped 1.92%, lead fell 1.6%, nickel decreased 680 yuan/mt, while zinc increased 0.99%.

Copper: Three-month LME copper opened at $9,627/mt in the overnight trading and hit the lowest level at $9,507/mt, before closing at $9,529 yuan/mt, down 1.41%. The trading volume was 15,000 lots, and the open interest was 260,000 lots. LME copper is expected to trade between $9,480-9,580 yuan/mt today.

The SHFE 2112 copper contract fell 1.04% last night to close at 70,800 yuan/mt after hitting the lowest point at 69,800 yuan/mt. The trading volume was 57,000 lots, and the open interest was 131,000 lots. SHFE copper is expected to trade between 70,400-71,100 yuan/mt today, with spot premiums between 500-690 yuan/mt.

St. Louis Fed Chairman Brad gave a hawkish speech yesterday, stating that the Fed should accelerate the taper of monetary policy in order to combat inflation, and the market's expectations for an early interest rate hike intensified again. In addition, US October retail sales data set the fastest month-on-month growth rate in the past seven months. The October industrial output data and the November confidence index of home builders were also higher than expected. The U.S. dollar index hit a new high since the end of July 2020, which forced down the copper futures. Spot holders keep pushing up the premiums amid extremely low inventories and risks of short squeeze for the December contract. But the market is less willing to accept the prices.

Aluminium: Three-month LME aluminium opened at $2,636.5/mt yesterday and closed at $2,573/mt, a decrease of $61.5/mt or 2.33%.

Overnight, the most-traded SHFE 2201 aluminium contract opened at 18,600 yuan/mt, with the lowest and highest at 18,320 yuan/mt and 18,760 yuan/mt before closing at 18,345 yuan/mt, down 360 yuan/mt, or 1.92%.

The coal prices plunge once again, which aggravated the negative sentiment in the aluminium market. In addition, the US dollar index hit a new high since July 22, 2020 in the night trading, putting strong pressure on the metal market. There is no major change in the domestic aluminium supply side. No smelters have resumed production. The impact of power rationing on downstream consumption has faded, but the overall consumption showed seasonal weakening. In addition, aluminium ingot inventory increased again, which also weighed on aluminium prices. In the short term, SHFE aluminium will remain weak due to lower costs and demand concerns.

Lead: Three-month LME lead opened at $2,324/mt last night and fluctuated weakly amid sluggish trade in the Asian session. Later the lead stocks across LME-listed warehouses increased by 4,300 mt to 58,175 mt, and the US dollar index surged to 95.99. LME lead plunged to the lowest level and closed at $2,280/mt, down 1.62%.

The most-liquid SHFE 2112 lead contract opened at 15,195 yuan/mt last night and decreased 1.6% to settle at 15,020 yuan/mt last night, with open interest losing 159 lots to 57,262 lots.

Zinc: Three-month LME zinc rose 0.47% to settle at $3,223/mt last night, with open interest decreasing by 3,878 lots to 275,000 lots. Zinc stocks across LME-listed warehouses dropped by 300 mt or 0.16% to 182,450 mt. On the macro side, although the US retail sales data increased significantly, market sentiment was relatively muted due to the large increase in CPI at the same time. LME zinc is expected to move between $3,200-3,250/mt.

The most-traded SHFE zinc rose 0.99% to settle at 22,865 yuan/mt, with open interest falling 5,929 lots to 41,432 lots. Lower zinc prices boosted the destocking rate. The most-traded SHFE 2112 zinc contract is expected to move between 22,500-23,000 yuan/mt today and spot premiums of domestic #0 Shuangyan will stand at 50 yuan/mt over the December contract.

Nickel: SHFE nickel contract opened at 143,300 yuan/mt in the overnight trading and fluctuated within a narrow range under the 10-day moving average. The contract closed at 142,820 yuan/mt last night, down 680 yuan/mt, with the open interest falling 6,103 lots to 94,091 lots. The trading volume was 83,296 lots. On fundamentals, the low inventory supports the nickel prices, but the demand fails to provide upward momentum. The falling NPI price also weighed on the nickel prices. The prices are expected to remain volatile.

Tin: The SHFE 2112 tin contract trended sideways around 280,000 yuan/mt in night trading, and investors are beginning to roll their positions onto the 2201 contract. Spot market remained tight and spot premiums remained high. SHFE tin will remain high in the short term amid stable

fundamentals. Strong demand in the long run will support the most-traded SHFE tin contract.

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