SMM Morning Comments (May 11): Base metals mostly higher on optimism over economy reopening

SHANGHAI, May 11 (SMM) – SHFE nonferrous metals, except for lead, cruised higher on Monday morning while their counterparts on the LME were higher across the board amid the prospects of the global economy reopening soon.  

Optimism surrounding global economic restarts, coupled with Friday’s data showing US lost fewer jobs than expected last month, improved market sentiment. Stocks in Asia traded higher on Monday morning, and Wall Street posted consecutive rallies to end last week.

The US dollar index, which tracks the greenback against a basket of its peers, remained below the 100 mark on Monday morning, while oil prices reversed an earlier slip caused by concerns over a persistent glut.

On Friday night, SHFE base metals, except for tin and lead, traded higher. Aluminium gained 0.4%, copper and nickel rose more than 0.3%, and zinc advanced 0.2%, while tin dipped nearly 0.1% and lead dropped close to 0.8%.

The LME was closed for the bank holiday on Friday. All LME base metals strengthened last week, with copper posting the first weekly gain in three and zinc seeing the best week since October 2019.

Copper: The most active SHFE June contract opened at a session-high of 43,650 yuan/mt on Friday night, and hovered in a tight range to end 0.35% higher at 43,480 yuan/mt.

Aluminium: The most active SHFE July contract reversed an earlier moderate slip to close Friday night 0.4% higher at 12,455 yuan/mt. Bourse data showed that aluminium stocks at SHFE-approved warehouses have fallen below 400,000 mt, with on-warrant stocks standing below 180,000 mt, which supported the backwardation on SHFE aluminium. Spot prices are expected to remain in premiums over futures before the SHFE May contract expires on Friday. The SHFE July contract is expected to move between 12,300-12,600 yuan/mt today.

Zinc: The most-liquid SHFE July contract on Friday night slipped before stabilising to move in a tight range, erasing gains from a higher open to close up 0.18% at 16,875 yuan/mt. It remained above the higher Bollinger band and the five-day moving average. Zinc ore supply in China is expected to remain tight in anticipation of subdued imports in May-to-June, while high prices may prompt mine firms to increase shipments. The SHFE July zinc contract is expected to move between 16,600-17,100 yuan/mt today, while spot premiums for domestic 0# Shuangyan are seen at 100-120 yuan/mt over the SHFE May contract. Three-month LME zinc is expected to trade between $1,990-2,040/mt.

Nickel: The most-traded SHFE July contract notched a two-week high of 103,300 yuan/mt on Friday night, before easing to close just 0.32% higher at 102,090 yuan/mt.

Lead: The most-liquid SHFE June contract eased on Friday night, shedding 0.75% to end at a session-low of 13,815 yuan/mt. The contract has yet to move out of its recent range and is expected to continue to move sideways in the short term.

Tin: The most-traded SHFE July contract slipped on Friday night, giving back all the gains from a higher open to close a tad weaker at 129,530 yuan/mt. It remains above the five-to-60-day moving averages, and immediate support is seen at the 10-day moving average at 128,000 yuan/mt.