SMM Morning Comments (Feb 10): Base metals on SHFE were mostly higher as the US dollar fell to two-week low

SHANGHAI, Feb 10 (SMM) — Nonferrous metals on the SHFE rose broadly on Wednesday morning, while their LME counterparts set for a mixed start, as the dollar fell to two-week lows on Tuesday in choppy trading.

Shanghai base metals rose for the most part in overnight trading. Copper added 0.32%, zinc rose 1%, nickel advanced 0.29%, lead firmed 0.46% and tin increased 1.27%, while aluminium shed 0.5%. 

The LME complex, except for lead, also cruised higher on Tuesday. Copper rose 1.03%, aluminium advanced 1.7%, zinc jumped 2.36%, nickel firmed 1.02% and tin gained 1%, while lead edged down 0.05%. 

Copper: Three-month LME copper rose 1.03% to close at $8,157/mt on Tuesday, While the most-traded SHFE 2103 copper contract added 0.32% to end at 59,760 yuan/mt in overnight trading.

US crude inventory plunged 3.5 million barrels in the week ended February 5, according to the American Petroleum Institute (API). The larger-than-expected decline lifted oil prices. The dollar fell to two-week lows on Tuesday in choppy trading as risk sentiment improved in the afternoon session amid stock market gains and as US Treasury yields rose. LME copper is expected to trade between $8,120-8,200/mt today, and SHFE copper between 59,500-60,000 yuan/mt, while spot premiums will be seen at 10-80 yuan/mt.

Aluminium: Three-month LME aluminium advanced 1.7% to close at $2,061.5/mt on Tuesday, with open interest adding 4,006 lots to 725,000 lots.

The most-traded SHFE 2103 aluminium contract settled 0.5% lower at 15,785 yuan/mt in overnight trading, with open interest decreasing 1,852 lots to 157,000 lots. It is expected to move between 15,400-15,900 yuan/mt today.

Zinc: Three-month LME zinc jumped 2.36% to end at an intraday high of $2,706.5/mt on Tuesday, with open interest rising 2,470 lots to 231,000 lots. Zinc stocks across LME-listed warehouses dropped by 400 mt or 0.14% to 289,325 mt. Optimism over economic recovery, expectations that the US Congress is likely to pass Joe Biden's $1.9 trillion Covid-19 relief package and a sliding US dollar index boosted zinc prices. LME zinc is likely to move between $2,660-2,710/mt today.

The most-liquid SHFE 2103 zinc contract firmed 1% to settle at 20,245 yuan/mt in overnight trading after hitting a two-week high at 20,340 yuan/mt earlier in the session, with open interest losing 2,907 lots to 73,327 lots. Enterprises are likely to resume production earlier than previous year as employees are encouraged to stay where they work for the Spring Festival in order to reduce the possibility of being infected with COVID-19, and optimism over post-holiday demand from the infrastructure sector also bolstered zinc prices. The March contract is likely to move between 198,00-20,300 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen at 30 yuan/mt against the contract.

Nickel: The most-active SHFE 2104 nickel contract closed 0.29% higher at 134,760 yuan/mt in overnight trading, with open interest losing 4,954 lots to 165,000 lots.

Lead: Three-month LME lead edged down 0.05% to end at $2,073/mt on Tuesday, after earlier registering a new high in 2021 of $2,099/mt. LME lead stocks shrank by 400 mt to 92,850 mt. 

The most-liquid SHFE 2103 lead contract climbed to a nearly two-week high of 15,485 yuan/mt in overnight trading before paring some gains to settle 0.46% higher at 15,325 yuan/mt.

Tin: Three-month LME tin gained 1% to close at an intraday high of $23,200/mt. LME tin stocks further declined to 775 mt, which is expected to lend support to tin prices in the short term. LME tin is expected to trade between $22,500-24,000/mt today.

The most-liquid SHFE 2104 tin contract increased 1.27% to end at 165,530 yuan/mt in overnight trading, with open interest losing 2,100 lots to 32,357 lots. It is likely to move between 162,000-167,000 yuan/mt today.