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SMM Morning Comments (Nov 18): Most Base Metals Closed with Losses amid Weaker Market Risk Appetite
Nov 18, 2021 09:54CST
Most of the base metals prices closed with declines overnight. The weaker-than-expected housing starts in the US has kept the market cautious.

SHANGHAI, Nov 18 (SMM) – Most of the base metals prices closed with declines overnight. The weaker-than-expected housing starts in the US has kept the market cautious.

LME copper fell 1.74%, aluminium rose 1.38%, lead slid 1.32%, and zinc dipped 1.1%.

SHFE copper shed 1.2%, aluminium increased 90 yuan/mt, lead fell 1.03%, zinc slid 0.74%, and nickel fell 0.61%.

Copper: LME copper prices fell 1.74% to end at $9,363/mt overnight. Trading volumes stood at 16,000 lots and open interest stood at 254,000 lots. The most-active SHFE 2201 copper contract dipped 1.2% to close at 68,980 yuan/mt in overnight trading. Trading volume was 54,000 lots and open interest was 135,000 lots. On the macro front, the US October housing starts data released last night unexpectedly dropped to 1.52 million. The lower-than-expected data made the market sentiment cautious. In addition, the oil price plummeted yesterday, and the WTI and Brent crude oil prices fell to the lowest in six weeks, which also suppressed copper prices to a certain extent. In terms of spot markets, with the appreciation of the yuan and the rapid narrowing of the LME’s BACK structure, the SHFE/LME copper price ratio has quickly rallied. The import window has opened again, but the domestic customs limiting invoice issue has hindered domestic imports to a certain extent. This prompted merchants to raise prices. It is expected that the spot market will maintain high premiums in the short term. SHFE copper prices are expected to move between 68,800-69,400 yuan/mt today, and LME copper will trade between $9,320-9,420/mt. The spot premiums are likely to fluctuate between 560-900 yuan/mt.

Aluminium: The most-liquid SHFE 2201 aluminium contract increased 90 yuan/mt to settle at 18,630 yuan/mt in overnight trading. Three-month LME aluminium rose 1.38% to end at $2,608.5/mt last night.

The output in Guangxi declined again, and the domestic supply is unlikely to increase in a short time, which may boost the aluminium prices. But the current aluminium downstream consumption is seasonally weak, and the stocks of aluminium ingots increase, which pressuring on SHFE aluminium. SHFE aluminium will continue to be weak and fluctuate mainly due to lower costs and demand concerns.

Nickel: SHFE nickel prices shed 870 yuan/mt or 0.61% to close at 142150 yuan/mt. Open interest decreased by 7,038 lots to 88,607 lots. The SHFE 2112 nickel contract fell for 4 consecutive days. Nickel prices continued to maintain a weak fluctuation. From the purchasing demand side, the downstream buying sentiment gradually improved at lows, and the market supply was slightly tight; while on the supply side, currently the import window is closed, and the spot inflow in the bonded area is not large, so the nickel spot premium has an upward trend. On the whole, although the nickel price currently has no strong upward momentum, there is a willingness to purchase from the downstream near 140,000 yuan/mt. And it is expected that the nickel prices will hover rangebound above the 140,000 yuan/mt mark.

Lead: Overnight, the LME lead finally closed at $2250/mt, a decrease of 1.32%. SHFE 2112 lead contract prices fell 1.03% to end at 14,895 yuan/mt last night, with open interest down 4,025 lots to 53,705 lots.

Zinc: The most-traded SHFE zinc contract slid 0.74% to stand at 22,735 yuan/mt in overnight trading, with open interest down 2,271 lots to 38,622 lots. The low zinc price has limited boost to the overall consumption. 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 30 yuan/mt over the December contract.

Three-month LME zinc dipped 1.1% to settle at $3,184.5/mt last night, with open interest decreasing by 2,780 lots to 273,000 lots. Zinc stocks across LME-listed warehouses dropped by 1,275 mt or 0.7% to 181,175 mt. The inflation in Europe and the United States continues to rise, and the market estimate for interest rate hikes continue to increase. The obstruction of the Nord Stream 2 plan has caused energy problems to always plague the European economic recovery, and the overall market sentiment is weak. LME zinc is expected to move between $3,170-3,230/mt.

Tin: SHFE 2112 tin contract fluctuated rangebound, with small amount of funds leaving the market. The inventory for warrants remained stable and spot goods in the market were ample. The number of individual brands was scarce. Premiums quotations maintained a high level. The supply and demand stabilised. Prices congested around 280,000 yuan/mt with funds leaving the market. Tin prices are expected to fluctuate at high levels amid stable supply and demand and high spot premiums. The demand keeps increasing in the long run.


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