SMM Morning Comments (Nov 3): Shanghai base metals mostly higher due to positive macro data

SHANGHAI, Nov 3 (SMM) — Nonferrous metals on the SHFE were mostly higher on Tuesday morning, and their counterparts on the LME also rose for the most part, as a private survey showed China's manufacturing activity grew for the sixth straight month in October.

The Caixin/Markit Purchasing Managers' Index (PMI) for Chinese manufacturing came in at 53.6 for October, higher than the 53.0 reading forecast by analysts in a poll.

Shanghai base metals mostly advanced in overnight trading. Copper added 0.82%, zinc inched up 0.15%, aluminium rose 1.13% and tin strengthened 0.43%, while lead slid 0.07% and nickel weakened 0.65%.

The LME complex also rose for the most part on Monday. Aluminium jumped 1.24% to lead the gains, copper advanced 0.89%, zinc added 1.01% and tin edged up 0.73%, while nickel and lead underperformed with 0.13% and 0.88% losses respectively.

Copper: Three-month LME copper added 0.89% to end at $6,773/mt on Monday, and is likely to trade between $6,730-6,800/mt today.

The most-active SHFE 2012 copper contract advanced 0.74% to close at 51,450 yuan/mt in overnight trading, and it is expected to move between 51,200-51,600 yuan/mt today, while spot premiums will be seen at 150-200 yuan/mt.

US oil was boosted by the expectation of supply reduction last night, rising $3.5 /barrel compared with the daily low, which was also beneficial to other commodity prices. On the other hand, US stocks also rebounded to a certain extent, which boosted copper prices. However, the results of the US election are just around the corner, and investors are worried about the uncertainty of the results and the risk of turmoil in the US after the election. The safe-haven purchasing has not decreased, and the US dollar index and gold have risen simultaneously, indicating that there is still a strong risk aversion in the market. Combined with the European pandemic and other factors, it is expected that the copper prices are unlikely to continue to rise in the near term.

Aluminium: Three-month LME aluminium climbed 1.24% to close at $1,871/mt on Monday, with open interest falling to 739,000 lots. It is expected to trade between $1,850-1,890/mt today. 

The most-liquid SHFE 2011 aluminium contract rose 0.03% to settle at 14,830 yuan/mt on Monday night, and is likely to trade between 14,700-15,000 yuan/mt today.

Zinc: Three-month LME zinc rose 1.01% to close at $2,543.5/mt on Monday. Zinc stocks at LME-listed warehouses fell 725 mt to 219,220 mt. The US election day is approaching, and the market expects the economic stimulus policy after the election. ISM data shows that the manufacturing industry in the US has the highest growth rate since 2018 in October, boosting market sentiment. It is likely to trade between $2,520-2,570/mt today.

The most-liquid SHFE 2012 zinc contract climbed 0.15% to end at 19,710 yuan/mt in overnight trading. On the fundamentals, the tight situation at the ore end has not really been transmitted to the smelting end amid the environmental impact in the north and the seasonal off-season. Downstream consumption weakened slightly. It is expected to fluctuate rangebound in the near term. The December 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 150-160 yuan/mt.

Nickel: The most-active SHFE 2012 nickel contract shed 0.65% to close at 115,740 yuan/mt on Monday. The US election is approaching, market uncertainties are increasing with strong capital risk aversion. The contract is expected to trade weakly today. It will test support from 117,000 yuan/mt.

Lead: Three-month LME lead came off an intraday high at $1,813/mt to an intraday low at $1,783.5/mt before reversing some losses to settle 0.88% higher at $1,796/mt on Monday. The LME lead fell for two consecutive days. The impact of the turmoil brought by the US election on the lead prices should be wary of.

The most-active SHFE 2012 lead contract trended lower on Monday night, ending 0.07% lower at 14,315 yuan/mt. Without good news support, domestic lead prices are expected to fluctuate in the near term.

Tin: Three-month LME tin fell 0.73% to end at $17,835/mt on Monday, after hitting an intraday low at $17,640/mt earlier in the session. The market focuses on the process and results of the US presidential election, and the trend of the US dollar to guide the trend of LME tin should be monitored in the near term. Support below will be seen from $17,300/mt today.

The most-liquid SHFE 2012 tin contract closed down 0.17% at 143,830 yuan/mt on Monday night. The market focuses on the macro situation and the guidance provided by LME tin. Support below will be seen from 140,500 yuan/mt today. Support above will be seen from 140,500 yuan/mt today.