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SMM Morning Comments (Dec 1): Base Metals Fell across the Board amid Risk Aversion Sentiments
Dec 1, 2021 10:04CST
Shanghai base metals mostly trended lower on Wednesday morning amid stronger risk aversion sentiments. Meanwhile, their counterparts on LME all trended higher.

SHANGHAI, Dec 1 (SMM) – Shanghai base metals mostly trended lower on Wednesday morning amid stronger risk aversion sentiments. Meanwhile, their counterparts on LME all trended higher.

LME metals all closed with losses in the trading on Tuesday. Copper fell 1.55%, aluminium dropped 0.94%, lead decreased 0.61%, and zinc shed 0.56%.

SHFE metals performed similarly in the overnight trading. Copper dropped 1.17%, aluminium decreased 0.16%, lead fell 0.14%, zinc lost 0.13%, and nickel went down 0.15%.

Copper: Three-month LME copper opened at $9,544/mt last night, hitting the highest and lowest levels at $9,572/mt and $9,381.5/mt respectively, and closed at $9,451/mt, down 1.55%. The trading volume was 17,000 lots, and the open interest stood at 262,000 lots. Three-month LME copper is expected to trade between $9,340-9,440/mt today.

The most traded SHFE 2201 copper contract opened at 69,710 yuan/mt last night and rose to the highest level at 69,860 yuan/mt, then slumped to the lowest point at 69,020 yuan/mt, before closing 1.17% lower at 69,030 yuan/mt. The trading volume was 58,000 lots, and the open interest was 155,000 lots. SHFE copper is expected to trade between 68,800-69,400 yuan/mt today, with spot premiums between 200-600 yuan/mt

The CEO of Moderna warned that the effectiveness of the current vaccine against the Omicron variant of COVID-19 would be greatly reduced. Then the Fed Chairman Powell said that he could consider ending the tapering several months in advance, and he will discuss the accelerating of tapering at the future meetings. Powell's hawkish remarks once again heated up the market's risk aversion sentiments. US stocks and crude oil have fell sharply yesterday, and copper futures dropped as well. The sales will be ramped up in December. The lack of input invoice remains to be a prominent problem at the end of the year, so the holders held firm the prices. The premiums will increase.

Aluminium: LME aluminium opened at $2,647/mt on Tuesday morning and closed at $2,625/mt, down $25/mt or 0.94%. On the supply side, the current aluminium output finds it hard to increase.

The most-traded SHFE 2201 aluminium contract fell 0.16% or 30 yuan/mt last night to settle at 18,875 yuan/mt.

The aluminium producers in north China are likely to reduce production due to the heating season and the Winter Olympics, supporting prices. On the demand side, the shipments of aluminium ingots and aluminium rods are improving, and the short-term trend of destocking may continue, but the willingness of the long positions seems to be insufficient. Focuses should include changes in inventory, production restriction policies and the impact of COVID mutant.

Lead: Three-month LME lead opened at $2,280/mt and hit the highest level at $2,313.5/mt above the intraday moving average, and dropped to close at $2,270/mt, a decrease of $14/mt or 0.61%.

The most active SHFE 2201 lead contract opened at 15,400 yuan/mt and fell to the lowest level at 15,210 yuan/mt as shorts reduced positions and US dollar strengthened. SHFE lead closed 15,225 yuan/mt last night, down 160 yuan/mt or 0.14%.

Zinc: Three-month LME zinc fell 0.56% to $3,184/mt, with open interest decreasing 545 lots to 266,000 lots. Zinc stocks across LME-listed warehouses dropped by 2,475 mt or 1.53% to 158,975 mt, the lowest since July 2020. LME zinc is expected to move between $3,170-3,220/mt.

The most-traded SHFE 2201 zinc contract fell 0.13% to settle at 22,885 yuan/mt last night, with open interest up 1,049 lots to 79,752 lots. TCs declined again amid tight supply of zinc concentrate in China. The recovery of output is limited amid high electricity prices. Though the sir pollution warning ended in north China, the overall consumption is weak. The market saw premiums and the overall transactions were muted. The fundamentals weaken and prices are expected to fluctuate rangebound. The most-traded zinc contract is expected to move between 22,700-23,200 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 opened at 148,330 yuan/mt last night, and rose to the 5-day moving average at 150,000 yuan/mt at first, then fell below 148,000 yuan/mt to close at 147,570 yuan/mt, down 0.15%. The trading volume dropped 166,000 lots to 207,000 lots, and the open interest increased 17,764 lots to 152,000 lots. Nickel prices have insufficient upward momentum, and may drop due to weaker demand. However, the low inventory is supporting the prices. Therefore, the nickel prices are expected to remain volatile.

Tin: SHFE 2201 tin contract was muted and closed at 286,000 yuan/mt last night. The supply and demand was stable. Smelters whose operating rates were at lower levels last week gradually recovered. Spot goods in the market stabilised, with premiums and actual transaction price being stable. SHFE tin congested, without major fluctuations. Meanwhile, funds left the market. SHFE tin is likely to congest further amid stable supply and demand, muted spot transactions and lower funds inflow.

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