SMM Morning Comments (May 6): Shanghai base metals opened mostly higher after holiday

SHANGHAI, May 6 (SMM) – SHFE nonferrous metals opened mostly higher Wednesday as trading resumed from the five-day Labour Day holiday, on the back of optimism that more economies are moving toward easing lockdowns.

Tin added about 1.5%, aluminium climbed more than 1%, while nickel shed over 2% and copper edged lower. The SHFE night trading session will resume today as the spread of the coronavirus has stalled domestically. 

LME base metals rose across the board on Tuesday. Nickel was the best performer with a rise of 1.95%. Copper advanced 0.92%, aluminium gained 0.37%, zinc added 1.03%, tin climbed 0.4% and lead increased 0.58%.

Oil futures surged Tuesday, with nearest delivery West Texas Intermediate futures and Brent crude on Intercontinental Exchange rising to their highest settlements in 2 1/2 weeks, bolstered by the hope of a rise in demand following the reopening of major economies in Asia, the eurozone and the US.

Aluminium: Three-month LME aluminium edged higher on Tuesday with support from an extended rally in oil futures and improved demand outlook. The most-traded SHFE June contract continued to trend upward on Wednesday morning, with the trading range expected at 12,500-12,800 yuan/mt today. Spot premiums are likely at 60-80 yuan/mt. 

Zinc: The oil price rally lifted three-month LME zinc, which rebounded from an intraday low of $1,897.5/mt and ended 1.03% higher on the day at $1,920.5/mt. LME zinc inventories shrank 175 mt, or 0.17% on Tuesday to 100,675 mt. While some European countries and US states announced plans to reopen economy, the lingering impact of the coronavirus may see overseas demand returning at a slow pace. Today, LME zinc is expected to trade between $1,900-1,950/mt with the most-active SHFE contract trading at 16,000-16,500 yuan/mt. Accelerated infrastructure construction will continue to bolster domestic zinc consumption. 

Nickel: Three-month LME nickel closed higher for the first time since last Friday, as it regained losses and broke up the daily, the 20- and five- day moving averages to end Tuesday at $12,030/mt, up 1.95% on the day. Demonstrations occurred at the Indonesian Weda Bay Industrial Park of Tsingshan Indonesia on Labour Day, but its impact on supply is not significant so far. High production schedule at domestic stainless steel mills will support nickel fundamentals. Today, LME nickel is expected to test support from $12,000/mt. 

Lead: Three-month LME lead bounced back after slipped to a session low of $1,621/mt with strong support from $1,600/mt. It finished Tuesday 0.58% higher at $1,641.5/mt. 

Tin: Three-month LME tin closed 0.4% higher overnight at $15,185/mt amid decreasing inventories. Support below is expected from $15,000/mt with pressure above from $15,600/mt. The most-active SHFE contract will also remain at high levels today and test resistance from 132,000 yuan/mt.