SMM Morning Comments (Jul 23): Shanghai base metals mostly fell on concerns about US-China tensions

SHANGHAI, Jul 23 (SMM) – SHFE nonferrous metals, except for aluminium, extended losses from overnight on Thursday morning, as investors were cautious about US-China relations after Beijing said it had been notified by Washington that it must close its Houston consulate, a move that was condemned by Chinese officials.

LME and SHFE base metals mostly ended lower last night, relinquishing increase from the previous session. LME nickel was the worst performer with a drop of 2.79%. Zinc fell 1.89%, lead dipped 1.49%, copper shed 1.31%, aluminium lost 0.59%, and tin went flat. Investors focused on the resumption of demand in regions outside China. 

SHFE nickel slipped 1.85%, lead declined 1.66%, zinc fell 1.05%, tin lost 1.02%, copper eased 0.86% and aluminium edged down 0.03%.

Crude oil futures finished lower on Wednesday as industry data showed a surprise build in the US inventories and a spike in coronavirus cases cast doubts over a pick-up in fuel demand. 

Copper: Prices of copper pulled back after consecutive days of rally, with three-month LME copper closing down 1.31% on the day at $6,477/mt and the most-active SHFE contract falling 0.82% to end at 51,980 yuan/mt. Trading range today is expected at $6,470-6,520/mt for LME copper and at 51,700-52,000 yuan/mt for SHFE contract. Spot premiums in the domestic market may climb to 60-120 yuan/mt today as downstream purchases are expected to pick up after the decline in futures. 

Aluminium: Three-month LME aluminium fell as much as over 1% last night amid concerns about mounting US-China tensions, ending lower on the day at $1,689.5/mt, following a session low of $1,675/mt. 
The most-traded SHFE contract reversed decline from overnight and traded higher in early trades this morning, supported by healthy consumption and premiums in the spot market. The contract finished lower at 14,385 yuan/mt overnight. It is seen hovering between 14200-14600 yuan/mt today with LME aluminium at $1,670-1,710/mt. 

Zinc: Three-month LME zinc traded with support from the 20-day moving average and tested the Bollinger upper band, closing 1.89% lower on the day at $2,205/mt after hitting a session low of $2,179/mt. A surge in inventories also depressed prices as LME zinc stocks increased 12,400 mt, or 10.24%, on Wednesday to 133,450 mt. 
The most-active SHFE September contract followed its LME counterpart lower, finishing at 17,920 yuan/mt, down 1.05% on the day. The return of domestic demand may cap any downside room in prices today. The contract is seen trading at 17,500-18,000 yuan/mt today with LME zinc at $2,210-2,260/mt. Spot premiums of 0# Shuangyan zinc are seen at 90-100 yuan/mt over the SHFE August contract. 

Nickel: The most-liquid SHFE 2010 nickel contract fell to an intraday low of 104,830 yuan/mt as investors increased short positions, before it recouping some gains and finishing the day 1.21% lower at 105,350 yuan/mt. The impact of US-China tensions on market sentiment will come under scrutiny today. 
Three-month LME nickel climbed to an intraday high of $13,600/mt after opening, and ended 2.79% lower at $13,080/mt on Wednesday. Trade volume stood at 21,000 mt, and open interest increased 1,019 lots to 197,000 lots. LME nickel opened at $13,080/mt today, and pressure at $13,200/mt will be monitored.

Lead: Three-month LME lead declined to an intraday low of $1,794.5/mt, ending the day at $1,814/mt. Support below from the 20-day moving average will be watched. 
The most-active SHFE contract continued to retreat but stemmed decline at 14,765 yuan/mt, closing the day at 14,830 yuan/mt. Attention will be paid to the impact of US-China disputes.

Tin: Three-month LME tin slipped to a session low of $17,500/mt amid a broad decline in base metals, ending at $17,575/mt, $75/mt lower on the day. 
The most-liquid SHFE September contract fell amid departing long positions, and finished down 1.09% on the day at 141,230 yuan/mt. It is expected to find support from the 20-day moving average, or 140,500 yuan/mt today, with LME tin trading with support from $17,430/mt.