SMM Morning Comments (Aug 26): Nonferrous metals broadly rose on optimism over US-China trade talks

SHANGHAI, Aug 26 (SMM) — Nonferrous metals on the LME and SHFE cruised higher for the most part as of 10:13 Beijing time on Wednesday morning as senior US and Chinese trade officials reaffirmed their commitment to a Phase 1 trade deal, and investors awaited a speech by the Federal Reserve Chairman Jerome Powell on Thursday about the US central bank’s policy framework review.

The American Petroleum Institute (API) reported early this morning a draw in crude oil inventories of 4.524 million barrels for the week ending August 21.

Nonferrous metals on the LME rose across the board on Tuesday. Copper added 0.29%, aluminium advanced 0.51%, zinc rose 1.18%, lead strengthened 0.34%, nickel increased 0.67% and tin inched up 0.03%.

Shanghai base metals, except for aluminium and lead, cruised higher in overnight trading. Copper advanced 0.16%, zinc climbed 0.63%, nickel rose 1.36% and tin edged up 0.02%, while aluminium closed flat and lead weakened 0.63%.

Copper: Three-month LME copper closed 0.29% higher at $6,536/mt on Tuesday. It is expected to trade between $6,500-6,560/mt today.  

The most-active SHFE 2010 copper contract settled 0.16% firmer at 51,360 yuan/mt in overnight trading. It is likely to move between 51,300-51,800 yuan/mt today, while spot premiums are seen slightly lower at 30-70 yuan/mt.

The American Petroleum Institute (API) reported on Tuesday a draw in crude oil inventories of 4.524 million barrels for the week ending August 21. US producers shut most output in the Gulf of Mexico ahead of Hurricane Laura 

Rising crude oil prices driven by a larger-than-expected draw reported by the American Petroleum Institute (API) in crude inventories of 4.524 million barrels for the week ending August 21 and output cuts in the Gulf of Mexico by oil producers ahead of Hurricane Laura, and weak US dollar index boosted copper prices. In addition, continued demonstrations at Freeport-McMoRan’s Grasberg Copper & Gold mine in Indonesia and shrinking LME copper stocks also bolstered copper prices.    

Aluminium: Three-month LME aluminium settled 0.51% higher at $1,779/mt on Tuesday.

The most-liquid SHFE 2009 aluminium contract reversed some earlier losses to close flat at 14,675 yuan/mt in overnight trading. It is expected to move between 14,650-14,800 yuan/mt today, while spot premiums are seen lower at 40-60 yuan/mt.

Zinc: Three-month LME zinc rose 1.18% to close at $2,478/mt in choppy trading on Tuesday. Zinc stocks across LME warehouses fell 775 mt or 0.34% to 224,300 mt. Optimism over US-China trade deals and a 36% surge in US sales of newly built homes in July bolstered market sentiment. LME zinc is expected to move between $2,450-2,500/mt today.  

The most-traded SHFE 2010 zinc contract fell to a session low of 19,800 yuan/mt before wiping out some losses to end 0.63% higher at 19,910 yuan/mt in overnight trading. Positive news from overseas and stimulus policies the central bank drove up optimistic sentiment. The October contract is likely to trade between 19,600-20,100 yuan/mt today, while spot premiums for domestic 0# Shuangyan are seen lower at 120-130 yuan/mt.

Nickel: The most-active SHFE 2011 nickel contract rose 1.36% to end at 119,020 yuan/mt in overnight trading as strikes at an Indonesian NPI plant drove up concerns on supply and prompted investors to add long positions. Whether the contract could break above the 120,000 yuan/mt mark will come under scrutiny today.  

Lead: Three-month LME lead closed 0.34% higher at $1,988/mt on Tuesday, after hitting an intraday high of $2,013/mt earlier in the session.

The most-active SHFE 20010 lead contract trended lower in overnight trading, falling 0.63% to end at 15,850 yuan/mt. But lead prices are expected fluctuate at high levels in the short term given optimism over US-China trade talks and domestic ample liquidity.

Tin: Three-month LME tin fluctuated widely on Tuesday, edging 0.03% higher at $17,365/mt. Support below will be seen at around $17,250/mt today.

The most-liquid SHFE 2010 tin contract inched up 0.02% to settle at 141,230 yuan/mt in overnight trading, after hitting a session high of 141,440 yuan/mt. Pressure above will be seen at around the five-day moving average of 142,000 yuan/mt today.