1．Base Metals Basically Rose amid Extended Power Rationing

  Shanghai base metals basically trended higher on Tuesday morning amid extended power rationing. Meanwhile, their counterparts on LME mostly fell.

LME metals basically closed higher in the intraday or overnight trading on Monday. Copper rose 1.94%, aluminium gained 1.79%, zinc won 1.69%, and lead fell 0.4%.

SHFE metals performed similarly last night. Copper gained 1.07%, aluminium rose 2.21%, zinc won 1.88%, and lead dropped 0.64%.

Copper: Three-month LME copper rose 1.94% last night to close at $9,531/mt after hitting the highest point at $9,570/mt, and is expected to trade between $9,400-9,500/mt today. The trading volume was 20,000 lots, and the open interest reached 260,000 lots.

The SHFE 2111 copper contract inched gained 1.07% to close at 71,010 yuan/mt in the overnight trading after hitting $71,140 yuan/mt, and is expected to trade between 70,000-70,600 yuan/mt today, with spot premiums at 220-310 yuan/mt. The trading volume was 58,000 lots, and the open interest reached 144,000 lots last night.

As the energy crisis intensified, global coal and natural gas inventories stood low, and their prices soared, boosting the demand for crude oil. US oil rose on Monday and closed above $80 for the first time in 7 years. In the spot market, the transaction was light. Traders did not intend to enter the market due to the high prices despite the wide Backwardation structure. A large amount of imported copper may arrive at the ports recently, and the high premiums may fall back.

Aluminium: Three-month LME aluminium opened at $2,958.5/mt yesterday and closed at $3,042/mt, up 2.79%.

Overnight, the most-traded SHFE 2111 aluminium contract opened at 23,300 yuan/mt and moved between 23,220-23,685 yuan/mt before closing at 23,545 yuan/mt, up 510 yuan/mt, or 2.21%.

SMM data showed that the social inventory of aluminium ingots rose further to 864,000 mt on October 11. Aluminium plants are still affected by power rationing and their costs continue to rise. As such, aluminium prices still have strong upward momentum. It is expected that the most-traded SHFE 2111 aluminium contract will move between 23,500-34,000 yuan/mt today, and LME aluminium between $2,980-3,050/mt.

Lead: Three-month LME lead opened at $2,224.5/mt last night, and fluctuated lower to $2,216/mt, before rebounding to hit the highest point at $2,249/mt. LME lead closed at $2,216/mt last night, down 0.4%. The market was waiting for the official announcement of US tapering the bond purchase in November, and the high US dollar index weighed on the base metal prices. Today’s focus will be whether the price will risk the support at $2,200/mt, and whether shorts will continue to add positions.

The most-active SHFE 2111 lead contract opened at 14,805 yuan/mt last night, hitting the highest point at 14,980 yuan/mt, and closed at 14,900 yuan/mt, down 0.64%. Shorts continued to reduce positions for risk aversion, and SHFE lead was testing 15,000 yuan/mt. The power rationing is easing after the National Day holiday. Today’s focus will be the pressure at 15,000 yuan/mt.

Zinc: LME zinc opened at $3,161/mt yesterday and fell to $3,126/mt before rebounding to $3,240/mt. LME zinc closed at $3,222/mt, up $53.5/mt or 1.69%. Trading volume was 15,000 lots, and open interest increased by 2,532 lots to 267,000 lots. LME zinc inventory decreased by 3,500 mt to 193,850 mt, a decrease of 1.77%. The market needs to pay attention to the operation of overseas smelters amid rising energy prices and shortages. LME zinc is expected to move at highs of $3,180-3,230/mt today.

Overnight, the most-traded SHFE 2111 zinc contract opened at 23,450 yuan/mt and hit this year’s high at 23,880 yuan/mt before closing at 23,630 yuan/mt, up 435 yuan/mt or 1.88%. Trading volume rose to 239,000 lots, and open interest increased by 22,522 lots to 196,000 lots. 

Since September, the prices of natural gas and thermal coal in Europe and the United States have soared to record highs. The global energy crisis has intensified. Previously, a smelter in the Netherlands chose to reduce production due to the sharp rise in electricity prices, causing market concerns that more smelters overseas may follow suit. Meanwhile, Chinese zinc smelters are affected by power rationing, resulting in a decline in domestic output, which has also boosted bullish sentiment.

SHFE zinc is expected to move at highs of 23,300-23,800 yuan/mt today amid market optimism. 0# domestic Shuangyan zinc will trade at premiums of 70-90 yuan/mt over the SHFE 2110 zinc contract.

Tin: Overnight, SHFE tin pulled back and closed at above 280,000 yuan/mt, with open interest down more than 2,000 lots. The market supply is still tight. The output of tin ingots in September is estimated to fall 5% MoM, but the output in October is expected to increase by 11% MoM. The slight decrease in output in September led to tight market supply before and after the National Day. However, as output in October may grow, it is worth close attention whether downstream demand can match the higher output in the future. The most-traded SHFE tin contract is expected to meet resistance at 286,000 yuan/mt and find support at 280,000 yuan/mt today.