SMM Morning Comments (May 18): Base metals rose following gains in oil prices; LME nickel rebounded 1.3%

SHANGHAI, May 18 (SMM) – Nonferrous metals on both the SHFE and LME cruised higher across the board on Monday morning as oil prices jumped following last week’s gains.

The rally in the six nonferrous metals on the LME followed a red week last week. On Friday, those LME metals closed broadly lower, and all posted negative week. Nickel shed close to 2% on the day to be the worst performer. Lead and aluminium dropped 1.1%, copper and tin fell 0.5%, and zinc edged down 0.1%.

On the SHFE, those nonferrous metals traded mixed on Friday night, and nickel was also the biggest loser, down 1.6%. Tin slipped 0.8%, copper declined 0.6%, while aluminium stayed flat. Lead and zinc inched up more than 0.1%.

Crude prices jumped in the morning of Asian trading hours on Monday, following three consecutive weeks of gains, boosted by signs of demand pickup.

Meanwhile, the US dollar index, which tracks the greenback against a basket of its peers, slipped to 100.3, though still near three-week highs.

Copper: Three-month LME copper slipped after hitting an intraday high of $5,272/mt on Friday, closing down 0.53% at $5,185.5/mt. It dropped 1.8% on the week, after gaining 3.42% in the prior week. It has registered three negative weeks in four.

The most active SHFE June contract fell 0.6% to 42,740 yuan/mt on Friday night.

Aluminium: Three-month LME aluminium slid 1.08% to end at its lowest since April 8 at $1,460/mt on Friday, to produce a weekly decline of 2.14%. It is expected to move to $1,450-1,490/mt today.

The most active SHFE July contract recovered from earlier losses to close flat at 12,560 yuan/mt on Friday night. It still resides around the 60-day moving average. With wider discounts against the June contract and firm spot premiums, the July contract is expected to move at 12,400-12,800 yuan/mt today.

Zinc: Three-month LME zinc reversed an earlier slip to close just 0.1% lower at $1,966/mt on Friday, producing a weekly decline of 1.82%, the first negative week in three. Data showed that zinc stocks at LME-approved warehouses extended their decline, dipping 50 mt to 98,975 mt as of May 15. The pace of the inventory decline and demand recovery beyond China should be closely watched. The contract is expected to move at $1,940-1,990/mt today.

The most-liquid SHFE July contract jumped to an intraday high of 16,525 yuan/mt on Friday night, before it eased to end 0.15% higher at 16,435 yuan/mt, as resistance was stiff at the five- and 10-day moving averages. Falling inventories, however, will offer support. The contract is expected to move between 16,200-16,700 yuan/mt today, while spot premiums for domestic 0# Shuangyan are likely to steady at 120-150 yuan/mt over the SHFE June contract.

Nickel: Three-month LME nickel tumbled 1.95% to close at its lowest in almost two weeks at $11,820/mt on Friday. It sank 3.86% on the week, marking the worst week since late March.

The most-traded SHFE July contract also weakened on Friday night, losing 1.6% to 98,170 yuan/mt, lows since May 6. Strength at the 40- and 60-day moving averages will come under scrutiny. The contract is expected to trade between 98,000-103,500 yuan/mt this week.

Lead: Three-month LME lead resumed its decline on Friday, slipping to a new more than two-week low of $1,592.5/mt in early European trading hours before clawing back some losses to close down 1.11% at $1,601/mt. It lost 2.73% on the week, after gaining 1.04% in the previous week.

The most-liquid SHFE June contract fluctuated to close 0.11% higher at 13,850 yuan/mt on Friday night. It remained rangebound, without a clear direction.

Tin: Three-month LME tin fell to its lowest since the beginning of May at $14,870/mt in American trading hours on Friday, before recouping some losses to end 0.5% lower at $14,960/mt. For the week, it declined 1.51%. Support is seen at the 40-day moving average at $14,700/mt.

The most-traded SHFE July contract slid on Friday night, shedding 0.84% to 127,660 yuan/mt. Immediate support is seen at the 20-day moving average, at 126,500-127,000 yuan/mt.