SMM Evening Comments (May 21): Shanghai base metals mostly rose amid China ‘two sessions’ optimism

SHANGHAI, May 21 (SMM) – SHFE nonferrous metals extended their rally for the most part on Thursday, following broad increases for three straight days, on the back of market anticipations for more stimulus policies from China’s ‘two sessions’ and rising expectations of economic revival from the coronavirus impact. 

China's top political advisory body started its annual session Thursday afternoon in Beijing.

Shanghai nickel led the gains with a rise of 2.51%. Copper advanced 1.03%, lead climbed 0.85%, tin added 0.9% while aluminium shed 0.74% and zinc lost 1.84%. 

China’s imports of nickel ore shrank in April as mining operations and shipments from the top supplier—the Philippines—were suspended to stem the spread of the COVID-19 pandemic.

The ferrous complex also traded higher Thursday as iron ore rallied 2.05% to its highest level in nearly ten months. Rebar gained 0.82%, hot-rolled coil increased 0.58%, stainless steel went up 1.38%, and coke rose 1.48%. 

Iron ore miners in Xingtai, north China’s Hebei province, have halted operations amid safety inspections, a move aimed at ensuring safety and air quality during the convening of China's 'two sessions'. The closure is estimated to impact domestic iron ore production by 20,000-30,000 mt/day.

Crude oil prices rose on Thursday to their highest level since March, bolstered by reduced US crude inventories and output cuts by major producers, which helped ease worries about a supply glut. 

Copper: The most-traded SHFE July contract held onto gains from overnight as it climbed to a session high of 44,500 yuan/mt before it trimmed some gains and finished the day 1.03% higher at 44,150 yuan/mt. The US dollar strengthened as some investors remained cautious about the lingering impact of the COVID-19, and this capped the rally in copper prices. As the KDJ indicators continued to expand upwards, the contract may further test pressure above with support from longs. 

Aluminium: The most-liquid SHFE July contract snapped a six-day rising streak as it came off from an intraday high of 13,020 yuan/mt, ending 0.74% lower on the day at 12,775 yuan/mt. The KDJ indicators expanded downwards. 

Zinc: The most-active SHFE July contract fell on limited development around fundamentals. It slipped in the afternoon session, hitting an intraday low of 16,405 yuan/mt and ending 1.84% lower on the day at 16,495 yuan/mt. Longs covered their positions, leading to a decline of 7,882 lots in open interests. Weak fundamentals and spot prices may see the contract expanding its downside room tonight. 

Nickel: The most-traded SHFE July contract climbed to the highest level in three months as longs aggressively loaded up positions, lifting the contract to a session high of 105,810 yuan/mt and settled it 2.51% higher on the day at 105,110 yuan/mt. Open interests added 16,820 lots to 117,000 lots. Tonight, the contract will likely test support from 105,000 yuan/mt. 

Lead: The most-active SHFE July contract held stable above 14,000 yuan/mt and closed higher for the fifth consecutive day on the back of the buoyant macroeconomic sentiment. The contract ended the day 0.85% higher at 14,170 yuan/mt. 

Tin: The most-liquid SHFE July contract continued to trend upward, finishing the day 0.9% higher at 134,770 yuan/mt, following an intraday high of 136,180 yuan/mt. It held above all moving averages, with pressure above expected from 135,000 yuan/mt tonight.