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SMM Morning Comments (Nov 25): Base Metals All Closed with Gains amid Bullish Sentiments

iconNov 25, 2021 09:59
Shanghai base metals extended the upward trend on Thursday morning. Meanwhile, their counterparts on LME trended mixed.

SHANGHAI, Nov 25 (SMM) – Shanghai base metals extended the upward trend on Thursday morning. Meanwhile, their counterparts on LME trended mixed.

LME metals all closed higher in the trading on Wednesday. Copper rose 1.19%, aluminium increased 1.14%, lead went up 0.89%, and zinc rose 0.44%.

SHFE metals performed similarly in the overnight trading. Copper gained 0.84%, aluminium rose 0.83%, lead inched up 0.03%, zinc won 0.21%, and nickel increased 1.75%.

Copper: Three-month LME copper opened at $9,821/mt last night, and gained 1.19% to close at $9,845/mt after hitting the highest and lowest levels at $9,880/mt and $9,786.5/mt respectively. The trading volume was 14,000 lots, and the open interest was 256,000 lots. Three-month LME copper is expected to trade between $9,970-9,880/mt today.

The most traded SHFE 2201 copper contract opened at $71,620 yuan/mt and won 0.84% to settle at 71,730 yuan/mt last night, after hitting the highest and lowest points at 72,260 yuan/mt and 71,620 yuan/mt respectively. The trading volume was 68,000 lots, and the open interest stood at 183,000 lots. SHFE copper is expected to trade between 71,300-71,900 yuan/mt today, with spot premiums between 260-520 yuan/mt.

The US October PCE price index announced on Wednesday soared to a 31-year high, and last week’s initial jobless claims reached its lowest level since 1969. As a result, the market had stronger expectations for the Fed to accelerate taper and advance interest rate hike, and the US dollar hit a new high at 96.95 since July 8 2020. There are only two days left for the long-term order delivery this month. The spot premiums fell sharply yesterday as some holders lowered the prices significantly for further restocking. The arrivals of imported goods increased the the port inventory, which also weighed on the prices. After the copper prices surged, the downstream users refuse to accept the high prices and premiums, and they were waiting for the overall prices decline. The spot premiums may shrink further after the deliveries for long-term orders end, but the shrinking room is limited as the market has turned rational.

Aluminium: LME aluminium opened at $2,673/mt on Wednesday and closed at $2,703/mt, an increase of $30.5/mt or 1.14%.

Overnight, the most-traded SHFE 2201 aluminium contract opened at 19,320 yuan/mt, with the highest and lowest prices at 19,520 yuan/mt and 19,050 yuan/mt before closing at 19,370 yuan/mt, up 160 yuan/mt or 0.83%.

Indonesia announced yesterday that it would cancel the export of bauxite, which triggered bullish sentiment in the market and attracted bulls to enter the market. However, SMM believes that this event will not have a major impact on the overall domestic supply. 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. The most-traded SHFE 2201 aluminium contract is expected to move between 19,200-19,600 yuan/mt today.

Lead: Three-month LME lead opened at $2,257/mt in the overnight trading on Wednesday, hitting the highest and lowest levels at $2,283.5/mt and $2,256/mt respectively, and closed 0.89% higher at $2,273/mt. The shorts kept reducing positions as the overall LME market was bullish.

The most-active SHFE 2112 lead contract opened at 15,335 yuan/mt last night, hitting the lowest point at 15,150 yuan/mt, and closed at 15,200 yuan/mt, an increase of 0.03%. The SHFE lead nearly reversed all gains in the intraday trading and stabilised at around 15,200 yuan/mt.

Zinc: LME zinc opened at $3,304/mt yesterday and once fell below $3,300/mt before rebounding to $3,349.5/mt. LME zinc closed at $3,315.5/mt, up $14.5/mt or 0.44%. Trading volume rose to 7,386 lots, and open interest decreased by 1,855 lots to 267,000 lots. LME zinc inventory decreased by 3,550 mt to 167,875 mt, a decrease of 2.07%, with most of the decline coming from warehouses in Singapore. Both mines and smelters overseas are experiencing disturbances. At the same time, with the expansion of LME cash-to-three-month backwardation and high spot premiums in Europe and the United States, LME zinc is likely to remain firm and move between $3,290-3,340/mt today.

Overnight, the most-traded SHFE 2201 zinc contract opened at 23,830 yuan/mt and hit a high at 23,910 yuan/mt before closing at 23,705 yuan/mt, up 50 yuan/mt or 0.21%. Trading volume rose to 145,400 lots, and open interest decreased by 923 lots to 181,600 lots. On the supply side, the overseas Tara mine encountered a large amount of water flowing into the mine during the drilling of the ventilation shaft, which caused the production to stop. It is not clear how long the shutdown will last. On the consumption side, Tangshan issued an orange warning for heavy pollution, and local galvanising companies were asked to limit production by about 50%. Downstream companies restocked as needed due to high zinc prices. In view of output cuts at overseas smelters and firm spot market overseas, it is expected that SHFE zinc will remain firm in the short term. However, it is necessary to be wary of the impact of domestic fundamentals on prices. The most-traded zinc contract is expected to move within a range of 23,300-23,800 yuan/mt today. 0# domestic Shuangyan zinc may trade at premiums of 70-80 yuan/mt over the SHFE 2112 zinc contract.

Nickel: The SHFE 2202 nickel contract was the most traded nickel contract yesterday, and the price hit the highest level at 156,480 yuan/mt in the overnight trading. It closed at 153,460 yuan/mt as the longs reduced positions in late trading, up 2,640 yuan/mt or 1.75% from the settlement price of the previous trading day. The trading volume was 249,000 lots, and open interest increased by 22,000 lots to 112,000 lots. SHFE nickel contract broke through the high of Bollinger band. The nickel price trend has diverged from the spot prices in the nickel industry chain. The prices of stainless steel and new energy products are falling steadily, which cannot support the continuous rise of nickel prices. Therefore, the nickel prices may pull back after the bullish sentiments are digested.

Tin: The continued closure of Myanmar's ports due to the pandemic has had little impact on smelters for the time being. Demand was relatively stable. Spot prices remained stable recently. The SHFE 2201 tin contract has become the most-traded contract, and its price gap with the 2112 contract narrowed rapidly with the entry of bulls overnight. The SHFE 2201 tin contract will remain high amid stable fundamentals in the spot market.

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