SMM Morning Comments (Jul 6): Shanghai base metals rose slightly following gains in stocks

SHANGHAI, Jul 6 (SMM) – Shanghai nonferrous metals traded slightly higher across the board on Monday morning, as stocks rose despite spikes in coronavirus cases.

The nonferrous complex on the SHFE saw mixed performance in Friday night trading. Lead slipped 0.7%, copper shed 0.6% and zinc lost 0.2%, while aluminium and tin gained 0.4% and nickel strengthened 0.5%.

On the LME, the six metals closed mixed on Friday. Copper dropped 1.3%, aluminium fell 0.7% and zinc shed 0.4%, while tin gained 0.2%, nickel advanced 0.4% and lead rose 0.7%.

For the week, the LME nonferrous complex, except for zinc, ended in positive territory. Nickel was up nearly 2.5% last week, copper jumped 1.2%, aluminium climbed 0.9%, tin advanced 0.6% and lead edged up 0.06%, while zinc bucked the uptrend with a paltry 0.02% loss.

The US dollar index, which tracks the greenback against a basket of its peers, fell in the morning of Asian trading hours on Monday, while oil prices climbed slightly.

Copper: Three-month LME copper fell sharply on Friday, snapping a six-day winning streak, which was believed to be a technical correction after significant gains, while a large increase in inventories weighed. The contract declined 1.29% to $6,015/mt on the day, but was up 1.21% on the week, marking the seventh consecutive weekly gain. It is expected to trade between $6,000-6,060/mt today.

The most-active SHFE contract slipped to a session-low of 48,480 yuan/mt on Friday night, before it recovered some ground to close 0.59% lower at 48,850 yuan/mt. It is likely to move between 48,800-49,100 yuan/mt today. Spot premiums are seen stable at 10-30 yuan/mt given the recent pull-back in prices.

Concerns over ore supply remain supportive of copper prices. Chile´s state-run Codelco said on Saturday it would temporarily halt construction on a new level at its flagship El Teniente mine, a move it said necessary to combat the fast-spreading coronavirus pandemic.

Aluminium: Three-month LME aluminium fell 0.74% to end at a session-low of $1,612/mt on Friday, the first increase in six trading days. It advanced 0.91% on the week, marking the third straight weekly gain. It is likely to move between $1,600-1,640/mt today.

The most-liquid SHFE August contract hit a new more than five-month high of 14,095 yuan/mt on Friday night, before it closed up 0.43% at 14,055 yuan/mt. It is expected to move between 13,900-14,200 yuan/mt today, while spot premiums will edge down on the continued ascent in futures prices.

Zinc: Three-month LME zinc slipped to a session-low of $2,016.5/mt before recouping some losses to close down 0.42% at $2,035.5/mt on Friday. LME zinc underperformed last week, as upside was limited by high inventories and worries that the resurgence of coronavirus cases will derail consumption recovery. The contract is expected to trade between $2,000-2,050/mt today, with the 40-day moving average under scrutiny.  

The most-active SHFE August contract reversed earlier gains to close down 0.18% at 16,690 yuan/mt on Friday night. TCs for zinc concentrate in China increased for July, which pointed to easing ore supply and improved production enthusiasm among smelters, That, together with a traditional low season in China and the resurgence of coronavirus cases globally, limits upside in SHFE zinc. The SHFE August contract is expected to trade at 16,400-16,900 yuan/mt today with spot premiums for 0# domestic Shuangyan at 80-90 yuan/mt over the July contract.

Nickel: Three-month LME nickel surged to its highest since February 18 at $13,130/mt, before it eased to finish its Friday trading session 0.43% higher at $12,975/mt, marking a sixth straight day of gains and registering a weekly gain of 2.45%. Whether it could break above the 13,000 mark will come under scrutiny today. 

The most-active SHFE October contract came off from six-week highs on Friday night, as shorts aggressively loaded up positions and longs in weak hands got forced out. The contract ended up 0.49% at 104,880 yuan/mt, below the 105,000 mark.

Lead: Three-month LME lead rose 0.71% to end at $1,785/mt on Friday, to produce a weekly gain of 0.06%. That followed another moderate 0.14% increase in the previous week.

The most-traded SHFE contract slipped to a one-week low of 14,565 yuan/mt, before closing down 0.71% at 14,585 yuan/mt.

Tin: Three-month LME tin rebounded from a session-low of $16,780/mt to close up 0.18% at $16,900/mt on Friday, as the 10-day moving average offered support. Pressure is seen at the 17,000 level. The contract was up 0.6% on the week, after two consecutive weeks of losses.  

The entry of longs helped the most-active SHFE September contract recover somewhat from an earlier slip on Friday night, and the contract ended up 0.43% at 139,800 yuan/mt. Pressure is seen at previous highs around 140,500, while support is at the 10-day moving average at 138,000.