SMM Morning Comments (Jul 9): Shanghai base metals mostly rose on Thursday morning, zinc added close to 4%

SHANGHAI, Jul 9 (SMM) – SHFE nonferrous metals extended gains for the most part on Thursday morning, with zinc remaining the standout performer and climbing as much as 3.7% in early trades. 

Concerns surrounding the coronavirus pandemic continued to linger, and this capped the upsides in base metal prices. 

Overnight, LME base metals climbed across the board while the SHFE nonferrous metals extended increase for the most part. Zinc led the gains with SHFE zinc rising 3.03% and its LME counterpart adding 3%. LME copper grew 0.69%, aluminium added 1.83%, nickel advanced 0.6%, tin climbed 0.71% and lead went up 0.25%. 

SHFE copper increased 1.05%, aluminium rose 0.78%, lead edged up 0.54%, while nickel slipped 0.23% and tin eased 0.03%. Rebar continued its rally and gained 1.47% with stainless steel rising 0.41%.

Crude oil futures traded higher Wednesday, bolstered by optimistic demand prospects, even as US crude inventories posted a surprise increase last week.

Copper: Three-month LME copper returned above $6,200/mt on Wednesday and finished 0.69% higher on the day at $6,236/mt, as investors increased their long positions. Continued rises in the stock markets, together with uncertainty about copper ore supply from Chile amid the coronavirus lockdown accounted for the rally in the red metal. Today, LME copper is seen trading between $6,210-6,270/mt with the most-liquid SHFE copper at 49,900-50,300 yuan/mt. Spot premiums are seen at 30-50 yuan/mt, supported by low availability with limited arrival of imported copper. 

Aluminium: Three-month LME aluminium scaled the highest level in four months, topping $1,670/mt, before it pared some gains and closed the day higher at $1,665/mt. The most-liquid SHFE August contract continued to move higher, ending at 14,160 yuan/mt following a session high of 14,240 yuan/mt. Prospects for near-term aluminium prices were positive on the back of higher costs of raw materials. The inflow of seaborne aluminium ingot may halt the decline in domestic inventories. SMM expects the SHFE contract to hover at 14,000-14,300 yuan/mt today with LME aluminium at $1,640-1,680/mt. 

Zinc: Three-month LME zinc climbed on investors improved risk sentiment and a board rally in base metals, hitting a session high of $2,145/mt and closed the day 3% higher at $2,129/mt. Open interest added 1,969 lots to 198,000 lots. LME zinc inventories extended a downward trend, falling 200 mt, or 0.16% on Wednesday to 121,950 mt. LME zinc has broken up the Bollinger upper band, but lingering concerns about the coronavirus crisis and expectations of the gradual recovery of mining operations will keep a lid on prices. Today, LME zinc is seen trading at $2,070-2,200/mt. 

The most-active SHFE August contract held onto gains from the daytime and rose to a session high of 17,495 yuan/mt last night, finishing 3.03% higher on the day at 17,315 yuan/mt. It has reached the highest level in five months, with the trading range expected at 17,000-17,500 yuan/mt today. 

Nickel: Three-month LME nickel held stable above the Bollinger upper band, rising to highs around $13,500/mt and finished at $13,480/mt, up 0.6% on the day. It opened at $13,475/mt today and may test support from the Bollinger lines today. 

The most-active SHFE contract found support from the five-day moving average and 107,000 yuan/mt, ending the day 0.35% lower at 107,150 yuan/mt. It is expected to again test pressure from 107,500 yuan/mt today. 

Lead: Three-month LME lead advanced during the European trading hours amid bullish market sentiment, hitting a session high of $1,848/mt before it ended up 0.25% on the day at $1,815.5/mt. It may face some downward pressure today. The most-active SHFE contract traded robustly and followed its LME counterpart higher, ending up 0.54% on the day at 14,830 yuan/mt. Pressure above from 15,000 yuan/mt will be watched today. 

Tin: Three-month LME tin climbed on a softened US dollar, ending at an intraday high of $17,100/mt. It is seen facing pressure above from $17,500/mt today, with the most-traded SHFE September contract trading with support from the 10-day moving average, or 149,500 yuan/mt.