SMM Evening Comments (Jul 8): Shanghai base metals extended gains despite COVID-19 uncertainty

SHANGHAI, Jul 8 (SMM) – SHFE nonferrous metals, except for tin, closed higher across the board on Wednesday July 8, as macro optimism remained supportive of base metals. 

Zinc led the increases with a rise of 1.94%. Copper advanced 0.83%, aluminium edged up 0.25%, lead grew 1.37%, nickel trimmed overnight gains and finished 0.22% higher. Tin, meanwhile, shed 0.31%.  

The ferrous complex extended their rally. Iron ore rose a significant 3.14% as concerns about the pandemic darkened the supply prospects. Brazilian President Jair Bolsonaro said Tuesday he has tested positive for coronavirus. 

Rebar gained 1.82% to the highest level in more than seven months. Hot-rolled coil climbed 1.87%, stainless steel went up 0.82% and coke closed up 1.84%. 

Hopes for an economic turnaround with government stimulus have kept investor sentiment upbeat, even as the number of coronavirus cases kept surging globally. 

Copper: The most-traded SHFE August contract traded higher for the third consecutive session, on the back of macroeconomic optimism and lingering concerns on the mining front. It climbed to an intraday high of 49,970 yuan/mt before ending 0.83% higher on the day at 49,800 yuan/mt. Investors added their longs, with open interest of the August contract rising 3,714 lots to 118,000 lots. The contract is expected to test 50,000 yuan/mt tonight, with its LME counterpart robust above $6,200/mt. 
Chile's Codelco has halted construction work at its largest mine, El Teniente, as the copper producer strives to slow the spread of the coronavirus through its workforce. Other major miners have revised their guidance as well amid pandemic uncertainty.

Aluminium: The most-liquid SHFE August contract rebounded and regained losses from the previous day, ending up 0.25% on the day at 14,150 yuan/mt with support from bullish positions. Optimist prospects for prices may keep the contract robust tonight.  

Zinc: The most-active SHFE August contract rose steeply near closing, hitting a session high of 17,115 yuan/mt and finished the day 1.94% higher on the day at 17,090 yuan/mt, as investors aggressively loaded up long positions. Open interest grew 3,076 lots to 92,074 lots. Little development on the fundamentals front may see the contract testing support from 17,000 yuan/mt tonight. 

Nickel: The most-traded SHFE October contract closed up 0.22% on the day at 107,530 yuan/mt, following a session high of 107,670 yuan/mt. It pared the increase from overnight as the price rally seemed to have lost steam. Tonight, it is expected to hover above 107,000 yuan/mt. 

Lead: The most-active SHFE August contract closed at an intraday high of 14840 yuan/mt, up 1.37% on the day, lifted by departing short positions. Open interest shrank 93 lots to 25,715 lots. The K-indicator returned above the five-day moving average. The contract will likely trade with support from the five-day moving average and test 14,840 yuan/mt tonight. 

Tin: The most-liquid SHFE September contract gave up gains from overnight as it failed to exceed 141,680 yuan/mt, closing the day 0.31% lower at 141,150 yuan/mt. Pressure above is seen from 142,500 yuan/mt tonight.