SMM Morning Comments (Dec 1): Shanghai base metals mostly weakened on dollar rebound

SHANGHAI, Dec 1 (SMM) — Shanghai base metals were mostly lower on Tuesday morning, while their counterparts on the LME cruised higher for the most part.

Shanghai base metals were mostly lower in overnight trading. While aluminium increased 1.84%, copper shed 0.46%, zinc slid 0.77%, lead declined 1.9%, nickel fell 2.97% and tin weakened 1.51%.

The LME complex also fell for the most part on Monday. Zinc declined 1.07%, lead slid 2.06%, nickel fell more than 2% and tin slipped 1.55%, while copper rose 0.81% and aluminium climbed nearly 2%.

Copper: Three-month LME copper rose to its highest level since 2013 of $7,708.5/mt on Monday, before giving up most of the gains to end 0.81% firmer at $7,566/mt. It is expected to trade between $7,490-7,570/mt today.  

The most-traded SHFE 2101 copper contract ended 0.46% lower at 56,660 yuan/mt in overnight trading, with open interest decreasing 12,000 lots to 144,000 lots. It is likely to move between 56,100-56,600 yuan/mt today, and spot premiums will be seen higher at 130-180 yuan/mt.

The Chicago Purchasing Managers’ Index (PMI) for November and the Pending Home Sales Index for October released overnight were weaker than expected, and the US Federal Reserve Chairman Jerome Powell called the US economic outlook “extraordinarily uncertain” despite hopes for a vaccine-fuelled economic recovery. Risk sentiment soured again and the US three major stock indexes all closed lower while the US dollar index rebounded above 92.

Zinc: Three-month LME zinc settled 1.07% weaker at $$2,778.5/mt on Monday, after touching a new high of $2,844/mt in 2020 earlier in the session, with open interest decreasing 1,571 lots to 242,000 lots. Zinc stocks across LME-listed warehouses shrank 700 mt or 0.32% to 220,625 mt. The US dollar bounce-off weighed on zinc prices. LME zinc is expected to trade between $2,770-2,820/mt today.  

The most-traded SHFE 2101 zinc contract closed 0.77% lower at 21,240 yuan/mt in overnight trading, with open interest falling 6,825 lots to 1010,889 lots. SHFE zinc cruised lower with its LME counterpart last night, but tight zinc concentrate supply remained supportive to zinc prices. The SHFE 2101 zinc contract is likely to move between 21,000-21,500 yuan/mt today, and spot premiums for domestic 0# Shuangyan will be seen lower at 130-140 yuan/mt against the December contract.

Nickel: The most-liquid SHFE 2102 nickel contract slid 2.97% to close at 118,780 yuan/mt in overnight trading, with open interest falling 5,345 lots to 161,000 lots.

Lead: Three-month LME lead climbed to its highest level in 2020 of $2,138/mt in European trading hours before slumping to an intraday low of $2,061.5/mt. It closed 2.06% lower at $2,063.5/mt on Monday, but is expected rise today amid a slew of positive coronavirus vaccine news.

The most-active SHFE 2101 lead contract fell 1.9% to settle at 15,245 yuan/mt in overnight trading on weak fundamentals.

Tin: Three-month LME tin declined 1.55% to close at $18,680/mt after hitting a more than one-week low of $18,580/mt earlier in the session. The US dollar index rebounded from its lowest level in more than two and a half years on Monday, as weakening US economic data weighed on risk sentiment. Support below will be seen from $18,500/mt today.

The most-liquid SHFE 2101 tin contract plunged in overnight trading, falling to around the 40-day moving average and wiping out most of the previous gains. It ended 1.51% lower at 146,300 yuan/mt in overnight trading, and is expected to fluctuate range-bound today with support below from the 145,000 yuan/mt level.