SMM Evening Comments (Jul 6): Shanghai base metals mostly rose amid revival hope

SHANGHAI, Jul 6 (SMM) – SHFE nonferrous metals closed mostly higher on Monday July 6, following after they opened Monday higher across the board, as a rally in the global stock markets bolstered market sentiment. 

Global stock markets rose to four-week highs on Monday, with Asian shares reaching four-month peaks, as investors bet on a revival in China’s economic activity to sustain global growth, even as rising coronavirus cases in the US slowed business resumption. 

Nickel led the gains on Monday with a rally of 2.63%, hitting the highest level in more than five months. Tin advanced 2.28%, zinc climbed 0.6%, aluminium added 0.93%, while copper edged down 0.2% and lead slipped 0.27%. 

The ferrous complex also ended higher for the most part, as iron ore rose 0.87%, rebar grew 0.42%, hot-rolled coil inched up 0.22%, while stainless steel eased 0.07% and coke edged down 0.27%. 

Copper: The most-traded SHFE contract climbed on departing shorts, rising to a session high of 49,220 yuan/mt and closed the day 0.2% lower at 49,040 yuan/mt. Open interest declined 4,520 lots on Monday to 117,000 lots. With support from the 10-day moving average, the contract may track its LME counterpart and test resistance above tonight. 
Chile's State-run Codelco said on Saturday it would temporarily halt construction on a new level at its flagship El Teniente mine, as an effort to curb the fast-spreading coronavirus pandemic. This again stoked concerns about raw materials supply tightness, which also supported the red metal. 

Aluminium: The most-liquid SHFE August contract finished higher for the second straight day as it came off after climbed to a session high of 14,155 yuan/mt, ending at 14,125 yuan/mt, up 70 yuan/mt on the day. Open interest decreased 1,451 lots to 166,738 lots. Amid a downtrend in social inventories of primary aluminium, strong performance in the spot market continued to support the futures market. Movement of longs will be closely watched tonight. 

Zinc: The most-active SHFE August contract regained losses from last Friday night and traded higher on bullish market sentiment, climbing to an intraday high of 16,820 yuan/mt and ending the day 0.6% higher at 16,820 yuan/mt. Bearishness around excess zinc supply in the medium-to-long term weakened amid macroeconomic optimism. Tonight, the contract may continue to move sideways. 

SMM data showed that zinc inventories in China rose over the weekend, primarily propelled by Tianjin where saw concentrated arrivals with deliveries from Baiyin accounting for the majority.

Nickel: The most-traded SHFE October contract rose to the highest level since February as investors aggressively added their long positions. It stood above the Bollinger upper band to hit a session high of 107,500 yuan/mt, closing the day 2.63% higher at 107,110 yuan/mt. Open interest grew 33,735 lots to 127,788 lots. SMM expects current fundamentals unlikely to sustain the price rally in the near term. Pressure above from 108,500 yuan/mt will be monitored tonight. 

Lead: The most-active SHFE August contract closed lower for the fourth consecutive day, as it retreated after a broad rally in base metals sent it to an intraday high of 14,650 yuan/mt in the afternoon session. The KDJ indicator continued to expand downwards, which may see the contract rangebound between the five- and 10- day moving averages tonight. Open interest of the SHFE September and October contract added a combined 558 lots on Monday, exceeding a rise of 303 lots in open interest of the August contract. 

Tin: As longs aggressively loaded up their positions, the most-liquid SHFE September contract broke up the Bollinger upper band and jumped to the highest level this year at 142,650 yuan/mt, before it trimmed gains and closed at 142,380 yuan/mt, up 2,590 yuan/mt on the day. Stable support below will likely see the contract testing 143,600 yuan/mt, a high level seen in September last year.