SMM Morning Comments (Feb 25): Shanghai base metals rose across the board as Powell kept dovish course

SHANGHAI, Feb 25 (SMM) — Shanghai base metals all cruised higher on Thursday morning, holding onto overnight gains, while their counterparts on the LME were mostly higher, as the Federal Reserve’s Powell reiterated on Wednesday that US interest rates will remain low and the Fed will keep buying bonds to support the US economy. 

Shanghai base metals all closed higher in overnight trading. Copper rose 1.49%, aluminium surged 3.03%, zinc added 0.16%, nickel jumped 2.19%, lead advanced 0.86% and tin soared 3.34%.

The LME complex performed similarly on Wednesday. Copper rose 2.68%, aluminium increased 2.27%, zinc and lead added 0.61%, nickel jumped 2.48% and tin gained 1.51%. 

Copper: Three-month LME copper rose 2.68% to close at $9,497.5/mt on Wednesday, after hitting a new high of $9,522.5/mt earlier in the session, The most-traded SHFE 2014 copper contract advanced 1.49% to end at 68,700 yuan/mt in overnight trading.

The Federal Reserve’s Powell reiterated on Wednesday that U.S. interest rates will remain low and the Fed will keep buying bonds to support the U.S. economy. The Dow Jones Industrial Average jumped 425 points to close at a record high in a volatile session amid rising risk appetite.

LME copper is expected to trade between $9,450-9,530/mt today, and SHFE copper between 68,500-69,000 yuan/mt, while spot copper will be traded between discounts of 200-100 yuan/mt.

Aluminium: Three-month LME aluminium jumped 2.27% to settle at $2,203/mt on Wednesday, with open interest adding 2,677 lots to 700,000 lots. It is likely to fluctuate between $2,000-2,200/mt today.

The most-liquid SHFE 2104 aluminium contract surged 3.03% to close at 17,145 yuan/mt in overnight trading, with open interest rising 13,006 lots to 221,000 lots. It is expected to move between 17,000-17,300 yuan/mt today.

Zinc: Three-month LME zinc ended 0.61% higher at $2,868/mt on Wednesday, with open interest adding 2,315 lots to 240,000 lots. Zinc stocks across LME-listed warehouses dropped by 1,425 mt or 0.52% to 270,525 mt. Continuous declines in LME zinc stocks suggested improved overseas demand, which supported LME zinc. It is likely to move between $2,830-2,880/mt today.  

The most-traded SHFE 2104 zinc contract added 0.16% to settle at 21,485 yuan/mt in overnight trading, with open interest decreasing 1,878 lots to 75,256 lots. Domestic treatment charges for zinc concentrate have hovered at low levels recently, and are likely to dip in March, which will support zinc prices. 

The April zinc contract is likely to move between 21,300-21,800 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen at 40-70 yuan/mt against the March contract.

Nickel: The most-active SHFE 2104 nickel contract closed 2.19% higher at 145,770 yuan/mt in overnight trading, with open interest increasing 1,808 lots to 156,000 lots.

Lead: Three-month LME lead gained 0.61% to end at $2,139/mt on Wednesday.  

The most-liquid SHFE 2104 lead contract increased 0.86% to settle at 15,840 yuan/mt in overnight trading. 

Tin: Three-month LME tin closed 1.51% higher at $26,915/mt on Wednesday. LME tin stocks expanded 155 mt to 1,665 mt. LME tin is expected to remain high, moving between $25,000-28,000/mt today, as global tin supply has yet to rise significantly.

The most-liquid SHFE 2104 tin contract jumped 3.34% to end at 195,190 yuan/mt in overnight trading, and is likely to trade between 180,000-200,000 yuan/mt today. Domestic tin ore supply remained tight, which will support tin prices.