SMM Morning Comments (Nov 24): Base Metals Closed Mixed with SHFE Lead Registering Biggest Gain

SHANGHAI, Nov 24 (SMM) – Base metals prices closed mixed in overnight trading.

LME copper rose 0.59%, aluminium edged down 0.83%, lead climbed 0.57% and zinc fell 1.64%.

SHFE copper rose 0.41%, aluminium decreased 0.21%, lead gained 1.0% and zinc lost 0.15%.

Copper: LME copper prices rose 0.59% to close at $9,729/mt in overnight trading and are expected to trade at $9,670-9,770/mt. Trading volumes stood at 12,000 lots and open interest stood at 255,000 lots. The most-active SHFE 2201 copper contract rose 0.41% to close at 71,260 yuan/mt in overnight trading and are expected to trade between 70,900-71,500 yuan/mt. Trading volume was 45,000 lots, and open interest was 175,000 lots. On the macro front, the United States announced that it would offer 50 million barrels of crude oil from its strategic reserve. The offering of its oil reserves was not as much as expected. Brent oil gained over 3% overnight, which bolstered copper. The flash manufacturing PMI in the US in November was 59.1, which was in line with market expectations, and the US dollar index was still at a high level. As for the spot market, the spot quotes fell slightly. But trades were quiet. Spot premiums are likely to move between 460-750 yuan/mt.

Aluminium: Overnight, the most-traded SHFE 2201 aluminium contract opened at 19,135 yuan/mt, with the highest and lowest prices at 19,295 yuan/mt and 19,050 yuan/mt before closing at 19,095 yuan/mt, down 40 yuan/mt or 0.21%.

LME aluminium opened at $2,689/mt on Tuesday and closed at $2,672.5/mt, a drop of $22.5/mt or 0.83%.

The domestic supply has tightened again, which may temporarily boost the market. However, demand has not been strong recently, and the regional demand gap between the north and south has gradually widened. The seasonal weakening of demand in the north may drag down aluminium prices. In the short term, SHFE aluminium is expected to fluctuate within a narrow range.

Lead: LME lead climbed 0.57% and closed at $2,253/mt overnight. Powell was nominated for re-election. The market expects that the Fed will be hawkish in the future, and the strong performance of the US dollar index may suppress the bullish sentiment of lead. The most-active SHFE 2112 lead contract closed at 15,085 yuan/mt, up 1.0%. The downstream buyers were on the sidelines yesterday. If SHFE lead prices stabilise at 15,000 yuan/mt, the spot trading may pick up. SHFE lead prices rebounded for three consecutive days this week. We shall pay attention to whether SHFE lead can stabilise at 15,000 yuan/mt today.

Zinc: Three-month LME zinc fell 1.64% to end at $3,301/mt last night, with open interest rising 1,783 lots to settle at 269,000 lots. Zinc stocks across LME-listed warehouses dropped by 3,600 mt or 2.06% to 171,425 mt. The increase in overseas electricity prices provides support to zinc prices, but the actual impact needs to continue to be paid attention to. LME zinc is expected to stand at $3,270-3,320/mt.

The most-traded SHFE 2201 zinc contract decreased 35 yuan/mt or 0.15% to 23,580 yuan/mt, with open interest increasing by 766 lots to 183,000 lots. On the supply side, Glencore’s smelter in Italy will overhaul a zinc sulphide production line of 100,000 mt before the end of next month; the output of the smelter in China showed recovery. In addition, Guangxi Yusheng and Southwest Energy & Mineral has commissioned in November, bringing additional growth. On the consumer side, zinc prices have risen sharply, which has further restrained downstream procurement demand. Holders have lowered their premiums, which is still difficult to boost transactions. The market held a bullish outlook as the output at overseas smelters declined again, boosting zinc prices. The most-traded zinc contract is expected to move between 23,200-23,700 yuan/mt today and #0 domestic Shuangyan zinc may trade at premiums of 70-80 yuan/mt over the SHFE 2112 zinc contract.

Tin: The supply and demand in the spot tin market remain relatively balanced. The market needs to pay attention to how the port closures in Myanmar due to the pandemic will affect raw material supply.

Overnight, the SHFE 2112 tin contract fell slightly, and traded below 290,000 yuan/mt for most of the time. Open interest of the 2112 contract declined sharply as more investors rolled positions into the 2201 contract. SHFE tin will remain high in the short term.