SMM Evening Comments (Jul 30): Shanghai base metals ended mostly higher, lead rose for fifth straight day

SHANGHAI, Jul 30 (SMM) – SHFE nonferrous metals, except for copper and tin, rose on Thursday July 30, following after they opened higher today. Investors digested the latest monetary policy decision from the US Federal Reserve and continued to follow a spike in COVID-19 cases.

Copper failed to extend gains from the previous day and finished 0.15% lower on Thursday as concerns surrounding the pandemic weighed on sentiment. SMM learned that some Chinese copper smelters, private enterprises in particular, have scaled back operation or carried out maintenance amid tight raw materials supply and falling profits. 

Tin slipped 0.75%, while lead increased for the fifth consecutive day with a rise of 1.8%, zinc climbed 2.01% and nickel added 1.64%. 

The ferrous complex also traded higher for the most part as iron ore advanced 1.02%, rebar went up 0.51%, hot-rolled coil grew 1.11%, stainless steel gained 1.24%, while coke shed 0.84%. 

An SMM survey showed that the operating rates of blast furnaces at Chinese steelmakers rebounded 0.23 percentage point in the last week of July, to an average 90.3%, as steel plants returned from maintenance after the impact of rainfall-induced floods. 

Gold prices pared gains on Thursday, amid profit-taking and as investors’ appetite for riskier assets grew after the Fed pledged to use all the tools to support the US economy.

Copper: The most-active SHFE 2009 copper contract opened at an intraday high of 52,150 yuan/mt, and finished the day 0.15% weaker at 51,690 yuan/mt as investors added their short positions. The US Fed kept its interest rates unchanged at near zero, in a move to ensure ample liquidity in the market. However, the escalating COVID-19 crisis keeps investors cautious about the economic situation, which will pressure copper prices. With support from the five- and 10- day moving averages, the contract may track its LME counterpart and try to recover losses from the day. 

Aluminium: The most-liquid SHFE contract traded robustly today and finished 1.8% higher at 14,720 yuan/mt, following a session high of 14,805 yuan/mt. Open interest rose 9,353 lots to 133,000 lots as investors added their long positions. SMM data showed that primary aluminium ingot inventories in China accumulated 10,000 mt this week, but overall stocks stayed at relatively low levels of 712,000 mt. SHFE warrants continued to shrink, to 96,600 mt on Thursday. Movement of short positions will be monitored tonight. 

Zinc: The most-active SHFE September contract advanced for the second straight day, ending up 2.01% on the day at 18,745 yuan/mt after rising longs sent it to an intraday high of 18,925 yuan/mt. It remains to be seen whether the contract could sustain increase tonight. 

Nickel: The most-traded SHFE October contract climbed to a session high of 111,950 yuan/mt on loaded-up longs. But it trimmed gains in the afternoon to close 1.64% higher on the day at 111,340 yuan/mt, following a pullback in precious metal prices. Open interest added 20,399 lots to 155,487 lots. The contract may continue to test pressure above from 112,000 yuan/mt tonight. 

Lead: The most-traded SHFE September lead contract rose for the fifth straight day. Loaded-up longs lifted the contract to a session high of 15,780 yuan/mt, before it paring some gains and closing 1.52% higher at 15,710 yuan/mt. The contract lacked upward momentum to rise further due to weak consumption at end-July. Whether it could break through 15,800 yuan/mt will be monitored tonight.

Tin: The most-liquid SHFE contract retreated to close down 0.75% on the day, at 147,280 yuan/mt, but it remained in an overall upward trend and stayed above all moving averages. Whether support from the five-day moving average will keep the contract above 146,500 yuan/mt will be watched this week. Pressure above is seen from 148,500 yuan/mt.