SMM Morning Comments (Jan 28): Shanghai base metals were mostly lower after overnight plunge on Wall Street amid uncertainty in global markets

SHANGHAI, Jan 28 (SMM) — Nonferrous metals on the SHFE mostly cruised lower on Thursday morning, and their counterparts on the LME fell across the board following an overnight plunge on Wall Street that wiped out the S&P 500′s 2021 gains and left it in negative territory for the year.

Shanghai base metals ended mostly lower in overnight trading. Copper edged down 1.48%, zinc weakened 1.81%, nickel shed 1.22%, lead fell 0.77% and aluminium lost 0.1%, while tin added 0.4%.

The LME complex fell across the board on Wednesday. Zinc plunged 3.13% to lead the losses, copper fell 1.9%, aluminium weakened 1.75%, tin slid 0.31%, lead edged down 2.41% and nickel dropped 1.55%.

Copper: Three-month LME copper fell 1.9% to end at $7,843/mt on Wednesday, and is likely to trade between $7,790-7,870/mt today.

The most-active SHFE 2103 copper contract went down 1.31% to close at 57,950 yuan/mt in overnight trading, and it is expected to move between 57,600-58,100 yuan/mt today, while spot premiums will be seen at 10-90 yuan/mt.

The Federal Reserve kept the interest rate and bond purchase plan unchanged, and did not take measures to stimulate the economy. Fed Powell said that the pace of economic recovery may be slowing down before the COVID-19 pandemic is over. The Fed statement aggravated the market's concerns about the prospects of economic recovery. The COVID-19 continued to be severe, and the US dollar index was boosted by safe-haven buying.

Aluminium: Three-month LME aluminium fell 1.75% to close at $1,987.5/mt on Wednesday, with open interest falling to 739,000 lots. It is expected to trade between $1,970-2,010/mt today. 

The most-liquid SHFE 2103 aluminium contract fell 0.1% to settle at 14,860 yuan/mt on Wednesday night, and is likely to trade between 14,500-14,900 yuan/mt today. The downstream demand weakened before year-end and the spot premium weakened, which suppressed aluminium prices. Recently, the import arbitrage window was closed, which inhibited the inflow of overseas goods. The pressure of overstocking aluminium ingots on the platform remained for the later social inventories, and the social inventories might continue to accumulate. As the Spring Festival approached, the downstream stockpiling sentiment was sluggish. Spot premiums for the contract will be seen higher at 50-100 yuan/mt.

Zinc: Three-month LME zinc fell 3.13% to close at $2,571.5/mt on Wednesday. Zinc stocks at LME-listed warehouses rose 59,475 mt to 294,500 mt. The Federal Reserve keeps the monetary interest rate unchanged, the pace of economic and employment recovery slows down, and the pandemic aggravates the uncertainty of economic development. LME zinc contract is likely to continue to be weak. The contract is likely to trade between $2,560-2,610/mt today.

The most-liquid SHFE 2103 zinc contract fell 1.81% to end at 19,505 yuan/mt in overnight trading. TCs on the supply side stopped falling and stabilised, while consumption entered the off-season near the end of the year, and social stocks gradually entered the accumulation stage, which dragged down zinc prices. Whether the maintenance and production reduction plan of smelters can provide support for zinc prices in the near term will be monitored. The SHFE zinc contract is expected to move between 19,500-20,000 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen higher at 170-180 yuan/mt.

Nickel: The most-active SHFE 2103 nickel contract fell 1.22% to close at 132,430 yuan/mt on Wednesday. Open interests rose 11,000 lots to 121,000 lots. The contract will test support from 132,300 yuan/mt today. On January 27, The Federal Reserve maintained the overnight rate, while keeping the monthly bond purchase scale unchanged. US dollar rose sharply boosted by safe-haven buying. It refreshed the high point since January 18 to 90.89, and the base metals fell under pressure.

Lead: Three-month LME lead settled 2.41% lower at $2,028/mt on Wednesday. Overnight, the Fed was cautious about economic recovery. The US dollar rose due to risk aversion, and LME base metals fell under pressure.

The most-active SHFE 2103 lead contract went down 0.77% to close at 15,405 yuan/mt on Wednesday night. The contract will test support from five-day moving average today.

Tin: Three-month LME tin closed down 0.31% at $22,800/mt on Wednesday. Under the cautious about the supply shortage, LME tin is expected to continue to maintain a strong trend. Pressure above will be seen from $23,000 /mt today. Support below will be seen from $22,000/mt today.

The most-liquid SHFE 2103 tin contract rose 0.78% at 172,430 yuan/mt on Wednesday night. The tight supply of tin ore in China has not been effectively alleviated, the enthusiasm of smelters for shipment is limited, and the supply in the spot market continues to be tight. The recent reduction in domestic circulation spot the release of pre-holiday stockpiling demand supported the contract. Pressure above will be seen from 175,000 yuan/mt today. Support below will be seen from 167,500 yuan/mt today.