SMM Morning Comments (Sep 4): Shanghai base metals fell across the board after Wall Street tumble

SHANGHAI, Sep 4 (SMM) — Shanghai base metals declined across the board on Friday morning as US stock indexes plunged as tech shares snap a ten-day winning streak, while their counterparts on the LME traded higher.  

On the SHFE, nonferrous metals finished in negative territory in overnight trading. Nickel fell 2.71%, lead declined 2.19%, copper weakened 1.18%, aluminium slipped 0.8%, zinc shed 1.83% and tin slid 1.53%.

The LME complex were mostly lower on Thursday. Nickel tumbled 4.07% to lead the losses, copper declined 1.57%, aluminium weakened 0.81%, zinc shed 1.4% and tin slid 1.09%, while lead outperformed with a 0.21% increase.   

Copper: Three-month LME copper fell below the daily moving average to an intraday low of $6,546.5/mt on Thursday, before reversing some losses to end 1.57% lower at $6,582.5/mt. It is expected to move between $6,560-6,640/mt today.  

The most-active SHFE 2010 copper contract slid 1.18% to close at 51,300 in overnight trading. It is likely to trade between 51,000-51,600 yuan/mt today, while spot premiums are seen lower at 40-120 yuan/mt.   

Overnight, US three major stock indexes plunged, recording the biggest single-day drop since June 11. US dollar index fluctuated vigorously, at one point breaking above 93 as key economic data including ISM non-manufacturing PMI, Markit services PMI and initial claims for jobless benefits in the week ended August 29 were released, which weighed on copper futures contracts. In terms of fundamentals, tight supply of copper concentrate eased. The latest customs data showed that China’s copper ore imports jumped 12.6% on the month to 1.79 million mt in July, and Peru’s copper output has returned to normal levels.   

Aluminium: Three-month LME aluminium slipped 0.81% to end at $1,776/mt on Thursday, with open interest decreasing 2,033 lots to 777,000 lots as investors reduced long positions. It is likely to fluctuate between $1,750-1,820/mt today.

The most-liquid SHFE 2010 aluminium contract ended 0.8% weaker at 14,270 yuan/mt in overnight trading, after hitting its lowest in more than two weeks at 14,180 yuan/mt earlier in the session. The October contract is likely to fluctuate between 14,200-14,450 yuan/mt today, while spot premiums are seen at 10-30 yuan/mt. 

Zinc: Three-month LME zinc fell 1.4% to settle at $2,491.5/mt in choppy trading on Thursday. LME zinc stocks remained high, dipping 50 mt or 0.02% to 220,100 mt. Tumbled US stock indexes and strengthened US dollar weighed on metals prices, and high US initial claims for jobless benefits last week and delayed fiscal stimulus package dampened investors’ confidence. LME zinc is expected to move between $2,490-2,540/mt today.

The most-traded SHFE 2010 zinc contract trended lower with its LME counterpart in overnight trading, closing 1.83% weaker at 19,855 yuan/mt. Support from downstream consumption will come under scrutiny in the near term. The October zinc contract is likely to trade between 19,800-20,300 yuan/mt today, while spot premiums for domestic 0# Shuangyan are seen slightly higher at 80-100 yuan/mt against the September contract.  

Nickel: US stocks plunged on Thursday, retreating from all-time highs as tech suffered its biggest drop in months. Deteriorating international relations and delayed US fiscal stimulus package dampened market confidence, weighing on base metals prices, with nickel seeing the largest drop.  

The most-active SHFE 2011 nickel contract plunged 2.71% to end at 118,610 yuan/mt in overnight trading. Whether it could rebound will be monitored today.  

Lead: Three-month LME lead plunged to a more than two-week low of $1,911.5/mt on Thursday, before rebounding to an intraday high of $1,960.5/mt. It ended 0.21% higher at $1,940.5/mt on Thursday.    

The most-active SHFE 2010 lead contract opened at a session high of 15,845 yuan/mt in overnight trading, and declined 2.19% to close at 15,405 yuan/mt. The implementation of new solid waste law and costs support of secondary lead are likely to limit the decline in lead prices.

Tin: Three-month LME tin came off an intraday high of $18,540/mt to end 1.09% lower at an intraday low of $18,140/mt on Thursday. Support below will be seen from the five-day moving average of $18,000/mt today.  

The most-liquid SHFE 2011 tin contract settled 1.53% lower at 145,140 yuan/mt in overnight trading. Support below will be seen from the 10-day moving average of 144,200 yuan/mt today.