SMM Morning Comments (Feb 18): Shanghai base metals rose across the board as mainland Chinese markets reopened after Lunar New Year holiday

SHANGHAI, Feb 18 (SMM) — Shanghai base metals all cruised higher on Thursday morning as mainland Chinese markets reopened after the Chinese New Year holiday, while their counterparts on the LME rose for the most part on robust US economic data. 

US retail sales, industrial output and producer prices data provided robust surprises to the upside, signaling the economic recovery from the pandemic recession is gaining momentum as vaccine deployment progresses.

LME nonferrous metals closed mixed on Wednesday. Copper shed 0.17%, zinc fell 1.18% and nickel weakened 0.29%, while aluminium rose 1.2%, lead edged up 0.05% and tin gained 0.88%. 

Copper: Three-month LME copper shed 0.17% to close at $8,413/mt on Wednesday.

The US January producer price index (PPI) announced last night recorded an annual rate of 1.7, which greatly exceeded expectations and previous values; January retail sales rose by 5.3%, the largest increase in seven months; January manufacturing output advanced for the fourth consecutive month. Boosted by strong economic data, the US dollar index showed strong overnight trading performance, which dragged down copper prices, but investors were still optimistic about the economic recovery, which limited the decline in LME copper. 

Today is the first trading day after the Chinese New Year holiday, and trades are expected to turn active in the spot market. LME copper is expected to trade between $8,380-8,460/mt today, and SHFE copper between 61,000-61,500 yuan/mt, while spot copper will be traded at premiums of 60-160 yuan/mt.

Aluminium: Three-month LME aluminium advanced 1.2% to settle at $2,112.5/mt on Wednesday, with open interest decreasing 5,068 lots to 681,000 lots.

Zinc: Three-month LME zinc touched a more than one-month high of $2,845.5/mt on Wednesday before giving up all the gains to end 1.18% lower at $2,810/mt. Zinc stocks across LME-listed warehouses dropped by 750 mt or 0.14% to 281,350 mt. A stronger US dollar, global vaccine distribution issues and virus variants weighed on LME zinc, but better-than-expected US retail sales, industrial production and producer price index (PPI) will limit its decline. LME zinc is expected to fluctuate between $2,800-2,850/mt today.

In the domestic market, zinc downstream producers are likely to reopen earlier than previous years as they were encouraged to stay where they work for the Spring Festival in order to reduce the possibility of being infected with COVID-19. In addition, orders for iron towers, scaffolds and photovoltaics are expected to be robust, which will also lend support to zinc prices. The SHFE 2103 zinc contract is likely to move between 21,000-21,500 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen at 30 yuan/mt against the contract.

Nickel: Three-month LME nickel slid 0.29% to close at $18,775/mt on Wednesday, with open interest losing 3,431 lots to 233,000 lots.

Lead: LME lead rose before falling during February 10-17, touching a new high in 2021 of $2,145/mt on February 15. LME lead stocks surged by 5,175 mt to 96,000 mt on February 16, which weighed on lead prices. 

Three-month LME lead inched up 0.05% to settle at $2,109/mt on Wednesday. 

LME lead climbed above $2,100/mt during the Lunar New Year holiday amid expectations of economic recovery and signs of strengthening inflation. Accelerated vaccination will help the economic recovery of major economies such as Europe and the United States. However, we need to pay attention to the impact of power outages and vaccine shipments in the US caused by heavy snow on the market. Treatment charges (TCs) for lead concentrate fell before the Chinese New Year holiday as imports were hampered. Battery scrap prices were high as secondary lead smelters conducted pre-holiday stockpiling. Higher production costs are likely to boost lead prices after the holiday. SHFE lead is likely to move between 15,000-15,750 yuan/mt today.

Tin: Three-month LME tin closed 0.88% higher at $24,540/mt on Wednesday. US retail sales, industrial output and producer prices data provided robust surprises to the upside, signaling the economic recovery from the pandemic recession is gaining momentum as vaccine deployment progresses. LME tin is likely to move between $23,500-25,000/mt today.