SMM Evening Comments (May 7): Shanghai base metals closed mixed as investors weighed economic data

Published: May 07, 2020 18:30 (GMT+8)
Nickel jumped 2.2% to lead the gains, zinc climbed 1.4%, copper rose 1.3% and lead advanced 1.1%, while tin dipped close to 0.1% and aluminium fell 0.8%.

SHANGHAI, May 7 (SMM) – SHFE base metals, except for aluminium and tin, closed higher on Thursday, as investors assessed Chinese economic data.

 

Nickel jumped 2.2% to lead the gains, zinc climbed 1.4%, copper rose 1.3% and lead advanced 1.1%, while tin dipped close to 0.1% and aluminium fell 0.8%.

 

Base metals on the LME, except for nickel and tin, were higher as of 18:29 Beijing time.

 

China’s exports unexpectedly rose in April while imports fell as movement restrictions to contain the coronavirus outbreak eased. Data from the General Administration of Customs released on Thursday showed China’s dollar-denominated exports rose 3.5% from a year ago while imports fell 14.2% in the same period.

 

A private business survey, however, showed China’s service sector activity remained mired in contraction last month as layoffs hit a record and export orders plunged. The Caixin/Markit services Purchasing Managers’ Index (PMI) did manage to pull up to 44.4 in April from 43 in March but was still way below its 51-55 range before the pandemic.

 

The Bank of England (BOE) on Thursday held interest rates at 0.1% but said it stands ready to take further action should the economic crisis caused by the coronavirus pandemic continue to deteriorate, with UK GDP (gross domestic product) expected to fall by 14% this year.

 

The closely-watched US weekly jobless claims data will be released tonight. Another 3.05 million workers are expected to have filed for benefits during the week ended May 2, which would bring the total number of Americans seeking unemployment benefits over the last six weeks to about 33 million.

 

Copper: The most-traded SHFE June contract climbed in afternoon trade, crossing the 43,000 mark to close at its highest since March 13 at 43,110 yuan/mt, up 1.29% on the day. An increase in China’s copper imports in April cemented the expectations of a sustained economic recovery in China, and that improved market sentiment.  

China’s imports of copper ore and concentrate increased about 14% to 2.03 million mt in April from a month earlier, according to data from China’s General Administration of Customs released on Thursday. That took the tally of copper ore and concentrate imports for the first four months of 2020 to 7.58 million mt, up 4.9% from the same period last year and recovering from a 0.5% decline registered in the January-to-March period.

China’s imports of unwrought copper and copper products increased 4.4% to 461,457.5 mt in April from a month ago. The imports in January-to-April totalled 1.75 million mt, up 10.4% year on year, accelerating from an increase of 9.1% in January-to-March.

 

Aluminium: The most-liquid SHFE July contract eased in the daytime session, losing 0.8% on the day to end at 12,460 yuan/mt. It gave back gains from the previous day in thin trading, as a bearish outlook for forward consumption hampered upside potential in the July contract.   

China’s exports of unwrought aluminium and aluminium products dropped about 11.4% in April from a year earlier to 441,000 mt, according to data from the General Administration of Customs released Thursday. The year-on-year decline expanded from a drop of 5% in March.

Accumulative exports in the first four months of 2020 came in at nearly 1.63 million mt, marking a decline of 16% from the same period last year. 

 

Zinc: The most traded SHFE July contract oscillated in a tight range around the daily moving average at 16,590 yuan/mt in the daytime session on Thursday, holding onto overnight gains to finish the day 1.37% higher at 16,615 yuan/mt, its highest close since February 25. Subdued supply of imported ore and hopes over global economies reopening are expected to continue to provide traction to zinc prices.       

 

Nickel: Aggressive buying lifted the most-traded SHFE July contract to a one-week peak of 102,780 yuan/mt in the daytime session, before the contract erased some gains to close the day 2.18% higher at 101,890 yuan/mt. Stronger stainless steel prices, buoyed by higher prices of ferro-nickel and nickel ore as well as falling inventories of stainless steel, fuelled the nickel rally seen after the Labour Day holiday. SHFE nickel is expected to continue its ascent, with pressure seen at 103,750 yuan/mt.

 

Lead: The most-active SHFE June contract crept up to an intraday high of 13,945 yuan/mt in the daytime session, before erasing some gains to finish the day 1.09% higher at 13,885 yuan/mt. The contract rose for a second straight day as an anticipated supply increase has yet to be evident and as the major consumer—lead-acid battery producers—did not scale back operations significantly. It, meanwhile, struggled to shrug off resistance at 14,000 yuan/mt due to strong bearishness across the market.

 

Tin: The buildup of long positions lifted the most-liquid SHFE July contract to an intraday high of 129,890 yuan/mt in afternoon trade, before the load-up of short positions forced the contract to give up all those gains to close the day in the red—0.07% lower at 128,850 yuan/mt. The contract still resides around the five-day moving average, with support at the 60-day moving average and resistance at 130,000 yuan/mt.

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

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