SMM Evening Comments (May 8): SHFE base metals closed mixed as economic restart lifted market sentiment

Telah Terbit: May 08, 2020 18:39 (GMT+8)
Zinc added 2.1% to lead the gains, copper rose 1.7%, tin gained 0.9% and lead edged up 0.04%, while nickel dipped 0.1% and aluminium shed 0.6%.

SHANGHAI, May 8 (SMM) – SHFE nonferrous metals, except for aluminium and nickel, closed higher on Friday, as investor sentiment improved with more governments slowly reopening their economies for business.

 

Zinc added 2.1% to lead the gains, copper rose 1.7%, tin gained 0.9% and lead edged up 0.04%, while nickel dipped 0.1% and aluminium shed 0.6%.

 

The LME was closed on Friday for a bank holiday.

 

For the week, SHFE nonferrous metals, except for aluminium, ended in positive territory.

 

The US dollar index, which gauges the greenback against a basket of rivals, continued its retreat and touched a session-low of 99.6 on Friday, after falling below the 100 mark on Thursday.

 

Oil prices, meanwhile, rebounded, with international benchmark Brent crude futures up 1.7% at $29.98 per barrel as of 17:52 Beijing time, after shedding nearly 1% on Thursday.

 

Market mood got a lift after China and the US said their top trade negotiators had held a phone call and agreed to strengthen economic and public health cooperation.

                                                                                                                   

On the data front, German exports plunged 12% in March, according to data released Friday — a much sharper drop than expected, as the coronavirus hit demand in the country. The fall marked the steepest drop in German exports since records began in 1990.

 

The US Labor Department will release its monthly jobs report at 8:30 am ET Friday. Economists polled by Dow Jones expect that more than 21 million jobs were lost in April.

 

Copper: The most-traded SHFE June contract hit an intraday high of 43,610 yuan/mt, before finishing the day 1.68% higher at 43,510 yuan/mt, its highest close in about eight weeks. The contract was up 1.33% for the week, marking a second straight weekly increase. That was bolstered by a positive demand outlook as data showed that China’s copper imports increased in April and inventories extended decline this week. The premium of the May contract over the June contract expanded to 200 yuan/mt, which also proved that copper consumption in China is strong. The resumption of copper mines in Peru and stable output from Chile, meanwhile, are set to ease concerns over copper mine supply, and hamper upside potential in copper prices.  

SMM data showed that copper inventories across Shanghai, Guangdong and Jiangsu saw another steep fall in just two trading days after the Labour Day holiday, decreasing 22,900 mt from Wednesday May 6 to 282,600 mt as of Friday May 8. Shanghai-bonded copper stocks decreased 14,500 mt from Thursday April 30 to 265,000 mt as of Friday May 8, marking a seventh straight week of decline.

The world's largest copper miner, Chile's Codelco, on Thursday reportedly said it was maintaining its production and shipments according to its 2020 plan despite disruption to its operations brought about by the coronavirus outbreak. In March, the miner’s copper output rose 14.8% to 147,600 mt from a year ago.

 

Aluminium: A more than 2,700 lot increase of short positions in 15 minutes knocked the most-liquid SHFE July contract to a one-week trough of 12,320 yuan/mt in morning trade. The contract later recovered some ground to close the day 0.64% lower at 12,430 yuan/mt, producing a 0.56% weekly loss. Expectations of weaker consumption will limit upside in SHFE aluminium, which is expected to meet resistance at the 60-day moving average.  

 

Zinc: The most active SHFE July contract extended gains from overnight trading and notched its highest since February 24 at 17,015 yuan/mt, shortly before it closed the day 2.11% higher at 16,940 yuan/mt. For the week, the contract jumped 3.8%. It registered six positive weeks over the past seven weeks.

SMM data showed that social inventories of zinc ingots in China rose sharply this week, increasing 10,100 mt from Thursday April 30 to 237,000 mt as of Friday May 8, after declining for seven consecutive weeks.

 

Nickel: The most-traded SHFE July contract reversed an earlier slip to close the day 0.13% lower at 101,720 yuan/mt. Support was strong at the 10-day moving average. The contract gained 1.7% on the week, registering a five-week winning streak.

SMM data showed that inventories of refined nickel in China, including bonded stocks, decreased 528 mt, or 0.96% from Thursday April 30 to 54,300 mt as of Friday May 8.

 

Lead: The most-active SHFE June contract hovered below the daily moving average during the daytime session, and closed the day a tad weaker at 13,895 yuan/mt. It gained 1.72% for the week, recovering from a 0.83% loss in the previous week, but has yet to shrug off resistance at 14,000. Secondary lead supply pressure in China is expected to begin to take hold in mid-May following the commissioning of several projects, which will weigh on SHFE lead prices.

SMM data showed that lead social stocks across Shanghai, Guangdong, Zhejiang, Jiangsu and Tianjin extended their decline, falling over 300 mt from Thursday April 30 to 8,000 mt as of Friday May 8.

 

Tin: The most-liquid SHFE July contract strengthened in afternoon trade, hitting a more than one-week high of 131,000 yuan/mt, as longs added their positions. It gained 0.87% on the day and closed at 130,180 yuan/mt, producing a weekly increase of 2.19%. The contract rose in six weeks of the past seven weeks. Immediate resistance is seen at 132,000 yuan/mt.

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