SMM Morning Comments (May 12): Base metals mixed after the release of China’s inflation data; nickel jumped more than 1%

SHANGHAI, May 12 (SMM) – SHFE nonferrous metals traded mixed on Tuesday morning as Chinese inflation data for April missed expectations. Their counterparts on the LME also saw mixed performance.

Nickel jumped, surging more than 1% on both the SHFE and LME.

China’s inflation for April released by the country’s National Bureau of Statistics missed expectations. The consumer price index (CPI) for April rose 3.3% year-on-year, versus expectations of a 3.7% increase. Meanwhile, China’s producer price index (PPI) for April declined 3.1% year-on-year, as compared to a 2.6% fall expected.

LME base metals closed mostly higher on Monday, with lead surging 1.8% to lead the way up. Zinc jumped 1.4%, nickel advanced 0.9%, tin rose 0.6%, aluminium gained 0.3%, while copper gave up earlier gains to close flat.

On the SHFE, lead was also the best performer in overnight trading, up more than 3%. Aluminium rose 0.8%, tin climbed 0.4%, zinc gained 0.2%, while nickel shed 0.2%, copper snapped a three-day winning streak and pulled back 0.9%.

Copper: Three-month LME copper reversed earlier gains to close flat at $5,280.5/mt on Monday, after four consecutive trading days of gains. The most active SHFE June contract opened low and hovered to end 0.87% lower at 43,280 yuan/mt overnight.

Aluminium: Three-month LME aluminium oscillated to close Monday 0.3% higher at $1,496.5/mt. It is likely to move to $1,480-1,510/mt in anticipation of demand recovery. The most active SHFE July contract jumped to a session-high of 12,620 yuan/mt in early trade overnight, and it later hovered in a tight range to end 0.76% higher at 12,600 yuan/mt. The contract is expected to rise to 12,500-12,800 yuan/mt today, in light of firm fundamentals as SMM data showed that social inventories of primary aluminium ingots in China have fallen towards the 1.1 million level and as premiums for the May contract over the June contract exceeded 230 yuan/mt.

Zinc: Three-month LME zinc reversed an earlier slip to its highest since March 13 at $2,033/mt in overnight trading and ended up 1.42% at $2,031/mt. Data showed that zinc stocks at LME-approved warehouses dipped 50 mt to 100,125 mt as of May 11, still standing at high levels. LME zinc is expected to move at $2,000-2,050/mt today as bulls will dominate the market in anticipation of global demand recovery. The most-liquid SHFE July contract advanced overnight, recouping earlier losses to close 0.15% higher at 16,900 yuan/mt. It still sits around the upper Bollinger band and is supported by the five-day moving average. Zinc demand in China will hold stable in May from April, while sharply higher zinc prices may sideline buyers and slow the decline in social inventories. 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 90-110 yuan/mt over the SHFE May contract.

Nickel: Three-month LME nickel boomeranged on Monday, slipping from a two-week high of $12,500/mt to an intraday low of $12,215/mt before recovering some ground to close up 0.94% at $12,410/mt. LME nickel underperformed its SHFE counterpart recently, but strong support is seen at $12,000/mt where several moving averages converge. The most-traded SHFE July contract climbed above the 102,200 yuan/mt level, before easing to close 0.24% lower at 101,940 yuan/mt overnight. Muted demand for pure nickel in China capped gains in SHFE nickel, which is likely to get a boost if profits on stainless steel remain high and downstream sectors recover from the COVID-19 crisis as soon as possible.

Lead: Three-month LME lead climbed towards the 40-day moving average on Monday, gaining 1.76% to $1,675/mt. The most-liquid SHFE June contract surged overnight, hitting a two-month peak of 14,305 yuan/mt before closing up 3.03% at 14,280 yuan/mt. Open interest for the contract expanded more than 4,000 lots overnight. The risks of a short squeeze amid low inventories in China is likely to help lift SHFE lead out of its recent range.

Tin: Three-month LME tin fell from its highest since April 26 at $15,450/mt to a session-low of $15,150/mt, before recovering some ground to end 0.56% higher at $15,275/mt. Resistance is seen at the 60-day moving average at $15,400/mt, while support is seen at $15,000/mt. The most-traded SHFE July contract hovered around the daily moving average at 131,000 yuan/mt overnight and closed 0.4% higher at 131,300 yuan/mt. It remains above the five-to-60-day moving averages, and immediate support is seen at the 10-day moving average at 129,000 yuan/mt.