SMM Evening Comments (May 6)

SHANGHAI, May 6 (SMM) – SHFE nonferrous metals closed lower on the first trading day after the Labour Day holiday, as trade tensions between Washington and Beijing re-escalated after President Donald Trump said the US would hike tariffs on goods from China.

Nickel saw the biggest loss of 2.5%, lead and copper dropped close to 1.9%, aluminium declined 1.8%, zinc fell close to 1.4%, and tin lost 0.5%.

The ferrous complex traded mixed. Hot-rolled coil slid 1.6%, and rebar tumbled 1.4% while iron ore gained close to 0.6%, coking coal advanced 0.8% and coke climbed 1.2%.

The LME is closed for a bank holiday on Monday and will reopen on Tuesday.

Copper: The most active SHFE June contract posted a sharply lower open and fell to a three-month low of 47,420 yuan/mt as fresh tariff threats from the US and a weaker-than-expected expansion in US manufacturing in April dampened market sentiment. After a Caixin survey showed solid growth in China’s services sector, the contract later regained some ground to close at 48,010 yuan/mt, down 1.86% on the day. Open interest for all copper futures contracts gained 27,192 lots to close to 528,000 lots, with the buildup of short positions accounting for the majority. The 1906 contract has fallen below all moving averages, but its KDJ lines are likely to shape a golden cross that would offer support to prices. It is expected to try to stand firmly above the 48,000 yuan/mt level tonight.

Aluminium: The most traded SHFE June contract opened lower and extended its declines to end at an intraday low of 13,925 yuan/mt, down 1.8% on the day. The unwinding of long positions accounted for today’s losses in SHFE aluminium. The contract is expected to trade between 13,850-14,140 yuan/mt tonight.

Zinc: While the most active SHFE June contract tried to regain some ground in early morning trade, strong technical resistance forced it to relinquish those gains to close 1.35% lower at 21,500 yuan/mt. Investors continued to move positions to forward contracts, with over 17,000 lots added in the July and August contracts. SMM data showed that social inventories of refined zinc across Shanghai, Guangdong and Tianjin inched up during the holiday, and showed no signs of strong consumption. The 1906 contract is expected to remain under the pressure from the 60-day moving average tonight, with dominant bearish sentiment.

Nickel: A lower LME nickel and US-China trade uncertainty forced the most liquid SHFE June contract to open lower today. SHFE nickel later in the day failed to recover from those losses, and closed 2.54% lower at 95,610 yuan/mt. Its KDJ lines converged, with an extended MACD green bar. SHFE nickel is expected to try to hang on above the 95,000 yuan/mt level tonight.

Lead: With shorts taking profits, the most traded SHFE June contract rebounded before it gave up those gains to close 1.89% lower at 16,380 yuan/mt. Its LME counterpart tumbled last week when SHFE lead was out of action for holidays, and this dragged on SHFE lead today. The SHFE 1906 contract is likely to trade rangebound at lows tonight, without the impact from its LME counterpart.

Tin: After falling to an intraday low of 146,270 yuan/mt shortly after opening, the most active SHFE September contract recovered some losses to end 0.5% lower at 147,350 yuan/mt. Support is seen at 146,000 yuan/mt while resistance is at 149,000 yuan/mt.