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SMM Morning Comments (May 15): Base metals mixed ahead of China’s economic data
May 15,2020 10:08CST
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Nonferrous metals traded mixed on Friday morning as investors awaited the release of Chinese economic data.

SHANGHAI, May 15 (SMM) – Nonferrous metals traded mixed on Friday morning as investors awaited the release of Chinese economic data.


On the LME, copper, aluminium, nickel and lead strengthened in the morning of Asian trading hours, while zinc inched down. On Thursday, the nonferrous complex closed mixed, with copper, aluminium and zinc barely changed. Lead rallied 1.4%, while nickel and tin extended their declines, shedding 1.6% and 0.3%, respectively.


SHFE copper and aluminium rose in the morning of Asian trading hours, while zinc, lead, nickel and tin held stable, following mixed performance in overnight trading. Nickel dropped 1.2% overnight to be the biggest loser. Tin slipped 1%, copper inched down 0.1%, while aluminium gained 0.4% and lead edged up 0.04%. Zinc stayed flat.


China’s retail sales, industrial production and fixed asset investment data for April are set to be out on Friday at around 10:00 a.m. Beijing time.


The US dollar index, which tracks the greenback against a basket of its peers, steadied just below a three-week peak of 100.5646 notched Thursday, while oil prices were mixed.


Copper: Three-month LME copper recouped earlier losses in North American trading hours on Thursday, rising from a 1-1/2-week low of $5,146/mt to close 0.02% higher at $5,213/mt. It is expected to move between $5,210-5,260/mt today.

The most active SHFE June contract also rallied in overnight trading, erasing earlier losses to close 0.12% lower at 42,960 yuan/mt. It is likely to trade at 43,000-43,400 yuan/mt today. Spot prices are seen at premiums of 10-20 yuan/mt, and higher premiums are set to further improve trades.


Aluminium: Three-month LME aluminium remained rangebound on Thursday, slipping from an intraday high of $1,482/mt to a new five-week low of $1,467.5/mt before rebounding to close flat at $1,476/mt. Lingering concerns over the economic fallout from the COVID-19 and fears of a re-ignition of US-China trade conflicts hamper upside potential in LME aluminium, which is expected to move to $1,460-1,500/mt today.

The most active SHFE July contract rose slightly in overnight trading, gaining 0.4% to end at 12,535 yuan/mt. A potential supply increase on the back of the opening of the import arbitrage window keeps backwardation on SHFE aluminium firm. The July contract is expected to move at 12,300-12,600 yuan/mt today.


Zinc: Three-month LME zinc rallied in North American trading hours on Thursday, rising from its lowest since May 6 at $1,929/mt to close 0.03% higher at $1,968/mt. Data showed that zinc stocks at LME-approved warehouses extended their decline, dipping 75 mt to 99,025 mt as of May 14. The pace of the inventory decline and demand recovery beyond China should be closely watched. The contract is expected to move at $1,950-2,000/mt today.

The most-liquid SHFE July contract also staged a rally in overnight trading, reversing an earlier slip from a more than one-week low of 16,245 yuan/mt to close flat at 16,450 yuan/mt. The 20-day moving average offered support, while resistance is at the 10-day one. In the physical market, downstream consumers stepped up purchases following recent losses in zinc prices. That, coupled with stable consumption, is underpinning zinc prices. The SHFE July zinc contract is expected to continue to move between 16,300-16,800 yuan/mt today, while spot premiums for domestic 0# Shuangyan are likely to expand to 130-150 yuan/mt over the SHFE June contract.


Nickel: Three-month LME nickel extended its pullback on Thursday, slipping to its lowest in more than a week at $11,965/mt before recovering some ground to close 1.59% lower at $12,055/mt. Strength at the 12,000 mark will comeunder scrutiny today.

The aggressive loading of short positions sent the most-traded SHFE July contract to a more than one-week low of 99,060 yuan/mt in overnight trading. The contract later clawed back some losses to end down 1.17% at 99,850 yuan/mt as shorts exited after longs added their positions. Whether the contract could return above the 100,000 mark will come under scrutiny.

On the fundamentals, firm prices of nickel pig iron (NPI) and stainless steel are likely to limit downside in nickel prices.


Lead: Three-month LME lead rose in North American trading hours on Thursday, after hovering in a tight range earlier in the session. It climbed from two-week lows to end 1.38% higher at $1,619/mt, after two consecutive days of sharp losses, and is expected to remain rangebound in the short term.

The most-liquid SHFE June contract recovered from earlier losses to end 0.04% higher at 13,830 yuan/mt in overnight trading. A potential rebound in lead social inventories in China is expected to weigh on SHFE lead prices.


Tin: Three-month LME tin fluctuated to close down 0.3% at $15,035/mt on Thursday. Support is still seen at $15,000/mt.

The most-traded SHFE July contract fell to a one-week low of 127,810 yuan/mt in overnight trading, before it recovered some ground to end down 0.99% at 128,600 yuan/mt. It has lost support at the 10-day moving average, and immediate support is seen at the 20-day moving average at 127,500 yuan/mt.

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