SMM Morning Comments (Jul 22): Shanghai base metals rose as EU clinched massive stimulus deal

SHANGHAI, Jul 22 (SMM) – SHFE nonferrous metals rose across the board at the opening bell on Wednesday morning, extending overnight gains, as investor sentiment was bolstered after European Union leaders reached a deal on a 750 billion euro ($862 billion) recovery fund to help the region recover from the coronavirus crisis.

Those metals eased somewhat as of 9:50 Beijing time. In overnight trading, zinc crept up 1.9%, nickel rose 1.4%, aluminium climbed 1.1%, copper advanced 1%, lead inched up 0.6% and tin edged up 0.1%.

On the LME, nonferrous metals closed higher across the board on Tuesday. Aluminium and zinc both advanced 2.2% on the day to lead the way up, nickel jumped 2.1%, copper climbed 1.4%, tin rose 1.2% and lead gained 0.7%.

The US dollar index, which measures the greenback against a basket of its peers, hovered around four-month lows in the morning of Asian trading hours on Wednesday.

Oil prices, meanwhile, edged higher in choppy trading as data from the American Petroleum Institute (API) showed an increase in US crude supplies for last week as well as declines in inventories of refined products.

Copper: Three-month LME copper advanced 1.37% to $6,563/mt on Tuesday, highs in more than a week. It has risen for four consecutive trading days and is expected to trade between $6,550-6,600/mt today.

The most-active SHFE September contract strengthened 1% to end at 52,380 yuan/mt in overnight trading, after hitting a one-week peak of 52,540 earlier in the session. It is likely to move at 52,400-52,700 yuan/mt today. Despite gains in futures prices, spot premiums are seen stable at 60-120 yuan/mt given the need to fulfill long-term contracts.

Firm fundamentals will continue to provide traction to copper prices amid market optimism.

Aluminium: Three-month LME aluminium notched its highest since July 13 at $1,702/mt on Tuesday, before closing 2.23% higher at 1,699.5. It is likely to move at $1,680-1,720/mt today.

The most-active SHFE August contract hit a session-high of 14,440 yuan/mt in overnight trading, before erasing some gains to end 1.05% higher at 14,395. There was little change to fundamentals, as spot premiums edged down. The SHFE August contract is expected to trade at 14,200-14,600 yuan/mt today.

Zinc: Three-month LME zinc rose to its highest since July 13 at $2,256/mt on Tuesday, before relinquishing some gains to end 2.23% higher at 2,247.5. Data showed that zinc stocks across LME warehouses continued their moderate decline on Tuesday, dipping 0.53%, or 650 mt to 121,050 mt. LME zinc is expected to trade between $2,210-2,260/mt today.

The most-active SHFE 2009 zinc contract followed its LME counterpart higher to a session-high of 18,225 yuan/mt in overnight trading, before ending 1.94% higher at 18,165. Optimism over zinc consumption in China also offered support to SHFE zinc prices. The September contract is expected to move between 17,900-18,400 yuan/mt today, while spot premiums for domestic 0# Shuangyan are seen at 90-100 yuan/mt over the August contract.

Nickel: Three-month LME nickel jumped 2.05% to end at $13,455/mt on Tuesday, after hitting a session-high of 13,500 earlier in the session. It has shrugged off a resistance confluence of the five- and 10-day moving averages, and pressure at 13,500 will come under scrutiny.

The most-active SHFE October contract followed its LME counterpart higher to a session-high of 107,830 yuan/mt in overnight trading, before ending up 1.37% at 107,450. It has broken above the 10- and 20-day moving averages and the upper Bollinger band, and whether it could shrug off pressure at 107,800 will come under scrutiny.

Lead: Three-month LME lead rose to an intraday high of $1,851.5/mt on Tuesday before finishing the day 0.68% firmer at 1,841.5. It appears to have stemmed its recent losses and resumed its ascent.

The most-active SHFE September contract strengthened 0.6% to end at 15,035 yuan/mt in overnight trading. It is expected to continue to rise in the short term.  

Tin: Three-month LME tin rose 1.15% to close at $17,575/mt on Tuesday, after scaling a new high since late January at 17,630.

The most-liquid SHFE September contract eased after hitting a one-week high of 142,900 yuan/mt in overnight trading, and closed a tad higher at 141,780.