SMM Morning Comments (Nov 30): Base Metals Edged up as Concerns of COVID-19 Variant Weakened

SHANGHAI, Nov 30 (SMM) – Shanghai base metals mostly trended upwards on Tuesday morning after the market concerns of new COVID-19 variant subsided. Meanwhile, their counterparts on LME trended mixed.

LME metals all closed with gains except for lead in the trading on Monday. Copper rose 1.64%, aluminium increased 2.24%, zinc gained 0.6%, and lead fell 0.22%.

SHFE metals performed similarly in the overnight trading. Copper increased 0.43%, aluminium rose 0.21%, zinc gained 0.35%, lead dropped 0.03%, and nickel fell 20 yuan/mt.

Copper: Three-month LME copper opened at $9,622/mt last night, hitting the highest and lowest levels at $9,644.5/mt and $9,521/mt respectively, and closed at $9,600/mt, up 1.64%. The trading volume was 15,000 lots, and the open interest stood at 261,000 lots. Three-month LME copper is expected to trade between $9,540-9,640/mt today.

The SHFE 2201 copper contract opened at 70,410 yuan/mt on in the overnight trading yesterday, hitting the highest point at 70,530 yuan/mt before falling to the lowest point at 69,810 yuan/mt, and closed at 70,160 yuan/mt, up 0.43%. The trading volume was 160,000 lots, and the open interest reached 160,000 lots. SHFE copper is expected to trade between 69,800-70,400 yuan/mt today, with spot premiums between 130-420 yuan/mt.

The concerns about further damage to economic growth and demand by the COVID-19 variant in South Africa have eased, and market attention has returned to low copper inventories. Copper futures fluctuated within a wide range and closed higher. With regard to the spot market, the price fell from high levels and the premiums turned to a normal level. The purchase picked up, but buyers still tried to force down the prices.

Aluminium: LME aluminium opened at $2,602.5/mt on Monday and closed at $2,650/mt, an increase of $58/mt or 2.24%.

Overnight, the most-traded SHFE 2201 aluminium contract opened at 19,015 yuan/mt, with the highest and lowest prices at 19,250 yuan/mt and 18,960 yuan/mt before closing at 19,055 yuan/mt, up 40 yuan/mt or 0.21%.

Domestic aluminium output is unlikely to increase. Smelters in the north may reduce output during the heating season and the Winter Olympics, which will provide some support for aluminium prices. Domestic aluminium ingot social inventory fell by 3,000 mt from last Thursday to 1.014 million mt on Monday. However, demand is unlikely to improve significantly at the end of the year due to environmental protection-linked production restrictions on downstream producers. In the short term, the market will closely watch changes in inventory, production restriction policies in different regions and the impact of COVID-19 mutant strains.

Lead: Three-month LME lead opened at $2,275/mt in the overnight session and rose rapidly to the highest level at $2,332.5/mt at first, and then fell to the lowest level at $2,265/mt as US dollar index strengthened. LME lead closed $5/mt or 0.22% lower at $2,271.5/mt.

The SHFE lead contract opened at 15,555 yuan/mt last night, and was dragged down below the intraday average by LME lead to 15,350 yuan/mt, before closing at 15,375 yuan/mt, a decrease of 5 yuan/mt or 0.03%.

Zinc: Three-month LME zinc gained 0.6% to settle at $3,202/mt last night, with open interest decreasing 1,620 lots to 266,000 lots. Zinc stocks across LME-listed warehouses dropped by 1,825 mt or 1.12% to 161,450 mt. LME zinc is expected to move between $3,170-3,220/mt.

The most-traded SHFE 2201 zinc contract rose 0.35% to settle at 22,935 yuan/mt last night, with open interest up 899 lots to 77,456 lots. The monthly TCs declined 50 yuan/mt (metal content) amid tight supply. The environmental protection restrictions in Hebei and Tianjin end today amid the onset of cold temperature. But certain areas still have restrictions on natural gas consumption. The increment of consumption is expected to be limited. Low inventory still supports zinc prices, which are likely to weaken. The most-traded zinc contract is expected to move between 22,500-23,000 yuan/mt today and #0 domestic Shuangyan zinc may trade at premiums of 10-20 yuan/mt over the SHFE 2201 zinc contract.

Nickel: SHFE nickel contract fell 20 yuan/mt to end at 149,180 yuan/mt in the evening trading of Monday. Open interest decreased by 1,481 lots to 135,000 lots. SHFE nickel prices have some support from the 10-day moving average of 148,000 yuan/mt, but lacked upward momentum. The prices moved rangebound. On the demand side, the nickel prices fell amid market pessimism. Downstream inquiries increased, and overall trading was brisk. Spot premiums stabilised. On the supply side, the closed import window has hampered the inflows of imported cargoes. Despite arriving shipments of nickel briquette, the market quotations are limited. Traded premiums stood at 200-500 yuan/mt. The nickel prices remained rangebound after falling from high levels.

Tin: Overnight, the SHFE 2201 tin contract hovered sideways after opening slightly higher. Supply and demand remained relatively stable. Inventory in the spot market was little changed. Spot premiums and prices remained stable. SHFE tin is expected to hover at highs amid narrowing price difference between spot and futures prices.