SMM Morning Comments (Feb 23): Shanghai base metals were mostly higher on softer dollar

SHANGHAI, Feb 23 (SMM) — Shanghai base metals were mostly higher on Tuesday morning, while their LME counterparts also rose for the most part, the US dollar resumed its slide on Monday as traders focused on the promise of coronavirus vaccinations and the outlooks for economic growth and inflation that could push bond yields higher.

Shanghai base metals, except for zinc and nickel, cruised higher in overnight trading. Copper rose 1.88%, aluminium added 0.6%, lead firmed 0.38% and tin advanced 1.38%, while zinc shed 0.82% and nickel weakened 1%.  

The LME complex, except for nickel, closed higher on Monday. Copper advanced 1.93%, aluminium rose 1.83%, zinc firmed 0.73%, lead gained 0.79% and tin surged 3.11%, while nickel slid 0.66%.  

Copper: Three-month LME copper advanced 1.93% to close at $9,113.5/mt on Monday after hitting its highest since 2011 at $9,269.5/mt earlier in the session. The most-traded SHFE 2104 copper contract rose 1.88% to end at 67,320 yuan/mt in overnight trading.

US President Joe Biden’s $1.9 trillion stimulus package is likely to pass at the end of the week, while the Fed Chairman Powell reiterated the central bank’s commitment to easy money policies, and this boosted copper prices. Trades were muted in the spot market despite the surges in copper futures prices as high prices kept downstream buyers on the sidelines. LME copper is expected to trade between $9,070-9,150/mt today, and SHFE copper between 67,100-67,600 yuan/mt, while spot copper will be traded between discounts of 50 yuan/mt and premiums of 60 yuan/mt.

Aluminium: Three-month LME aluminium gained 1.83% to settle at $2,175/mt on Monday, with open interest adding 4,910 lots to 694,000 lots.

The most-liquid SHFE 2104 aluminium contract added 0.6% to close at 16,790 yuan/mt in overnight trading, with open interest decreasing 1,428 lots to 212,000 lots.

Zinc: Three-month LME zinc ended 0.73% firmer at $2,888/mt on Monday, with open interest rising 1,179 lots to 238,000 lots. Zinc stocks across LME-listed warehouses plunged by 3,350 mt or 1.21% to 273,175 mt. Some equity investors grew concerned about rapidly rising Treasury yields in recent weeks as they could diminish the relative appeal of stocks. LME zinc is likely to move between $2,870-2,920/mt today.

The most-active SHFE 2104 zinc contract weakened 0.82% to settle at 21,785 yuan/mt in overnight trading, with open interest adding 2,441 lots to 66,795 lots. It is likely to move between 21,600-22,100 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen at 90 yuan/mt against the March contract.

Nickel: Three-month LME nickel slid 0.66% to close at $19,520/mt on Monday, while the most-traded SHFE 2104 nickel contract ended 1% lower at 144,690 yuan/mt in overnight trading, with open interest losing 12,000 lots to 189,000 lots.

Lead: Three-month LME lead firmed 0.79% to settle at $2,168/mt on Monday, posting a four-day winning streak.  

The most-liquid SHFE 2104 lead contract climbed 0.38% to close at 15,850 yuan/mt in overnight trading, after earlier hitting a high of 16,120 yuan/mt. Market participants were mostly concerned about lead consumption in March, posting pressure on SHFE lead, but post-holiday high risk appetite and a strong LME lead will keep SHFE lead at high levels in the short term.

Tin: Three-month LME tin surged 3.11% to end at $26,885/mt on Monday. “The dollar continues to wax and wane with U.S. data that have painted a mixed picture of the world’s biggest economy,” Joe Manimbo, senior market analyst at Western Union Business Solutions, said in a note on Monday. Concerns on tin supply and a weaker US dollar supported LME tin. 

The most-liquid SHFE 2104 tin contract rose 1.38% to settle at 191,730 yuan/mt in overnight trading, with open interset losing 3,034 lots to 38,279 lots. It is expected to trade between 180,000-200,000 yuan/mt today.