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SMM Morning Comments (May 13): Base metals eased amid risks of new infections as economies reopen
May 13,2020 10:00CST
price review forecast
Source:SMM
LME base metals eased across the board in the morning of Asian trading hours, extending their losses from the previous session. On Tuesday, lead pulled back 2.7% to lead the way down, zinc retreated more than 2%, aluminium fell 1.1%, nickel and copper shed about 1%, and tin edged down 0.03%.

SHANGHAI, May 13 (SMM) – Nonferrous metals traded lower on Wednesday morning as caution remains over a potential resurgence in coronavirus infections following the easing of lockdown restrictions.

 

LME base metals eased across the board in the morning of Asian trading hours, extending their losses from the previous session. On Tuesday, lead pulled back 2.7% to lead the way down, zinc retreated more than 2%, aluminium fell 1.1%, nickel and copper shed about 1%, and tin edged down 0.03%.

 

Base metals on the SHFE were all in negative territory as well, following overnight losses. Lead was the biggest loser in overnight trading, shedding 1.3%. Aluminium and zinc dropped 1.2%, copper slid 0.7%, tin fell 0.5% and nickel sank close to 0.4%.

 

In Asia, where the coronavirus first hit, several countries including China and South Korea have experienced an uptick in cases after restrictions were eased.

 

Following the previous session’s jump on additional production cuts by Saudi Arabia, oil prices fell in the morning of Asian trading hours, as the American Petroleum Institute (API) overnight reported an increase of 7.58 million barrels of crude oil in the US crude oil inventories for the week ending May 8.

 

Meanwhile, the US dollar index, which tracks the greenback against a basket of its peers, remained below the 100 mark.

 

Copper: Three-month LME copper oscillated to close 0.98% lower at $5,229/mt on Tuesday.

The most active SHFE June contract sank 0.65% to 43,000 yuan/mt in overnight trading.

 

Aluminium: Three-month LME aluminium slipped on Tuesday, erasing 1.14% to close at $1,479.5/mt. It needs tangible signs of a revival in demand to stage a rally. LME aluminium is likely to move to $1,470-1,500/mt today.

The most active SHFE July contract also fell in overnight trading, shedding 1.2% to 12,360 yuan/mt, lows in two weeks. With stiff resistance at the 60-day moving average, the SHFE July contract is expected to move at 12,300-12,600 yuan/mt today. In the physical market, spot premiums shrank ahead of the expiry of the SHFE May contract, which saw its premiums over the June contract widen to as high as 300 yuan/mt.

 

Zinc: Three-month LME zinc pulled back from two-month highs on Tuesday, losing support at the upper Bollinger band and dropping 2.04% to $1,989.5/mt, near the five-day moving average. Data showed that zinc stocks at LME-approved warehouses dipped 650 mt to 99,475 mt as of May 12, still standing at high levels. LME zinc is expected to move at $1,950-2,000/mt today with developments on mine production and demand overseas closely watched.

The most-liquid SHFE July contract fell 1.16% to 16,675 yuan/mt overnight. It has fallen below the upper Bollinger band and the five-day moving average, and sees support at the 10-day moving average. A slowdown in the decline of zinc social inventories in China, due to eased buying, will cap gains in SHFE zinc prices. The SHFE July zinc contract is expected to move between 16,300-16,800 yuan/mt today, while spot premiums for domestic 0# Shuangyan are seen at 110-120 yuan/mt over the SHFE June contract.

 

Nickel: Three-month LME nickel spent much of Tuesday’s trading session around $12,300/mt, below the daily moving average, after coming off from a session-high of $12,475/mt notched in early Asian trading hours due to a surge in SHFE nickel. LME nickel lost 1.01% to $12,285/mt, and fell below the five-day moving average on Wednesday morning.

The most-traded SHFE July contract traded rangebound in overnight trading and shed 0.35% to end at 101,390 yuan/mt. It remains above the 20-day moving average. Consumption recovery and supply cuts have improved the fundamentals for nickel from Q1, and inventories fell. The anticipated demand recovery following the easing of coronavirus lockdowns beyond China is set to give a boost to nickel prices.

 

Lead: Three-month LME lead eased off three-week highs on Tuesday, shedding 2.66% to end at a session-low of $1,630.5/mt.

The most-liquid SHFE June contract followed its LME counterpart lower in overnight trading, losing 1.34% to 13,990 yuan/mt. SHFE lead is likely to weaken in the short term as speculative funds exit.

 

Tin: Three-month LME tin reversed an earlier slip to close a tad weaker at $15,270/mt on Tuesday. Support is still seen at $15,000/mt.

As longs trimmed and shorts added their positions, the most-traded SHFE July contract slipped in overnight trading, giving up gains from a higher open to close 0.47% lower at 130,200 yuan/mt. Support is seen at the 10-day moving average at 129,000 yuan/mt.

 

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