SMM Evening Comments (May 20): Shanghai base metals mostly higher before China two sessions

SHANGHAI, May 20 (SMM) – SHFE nonferrous metals ended mostly higher on Wednesday, following two consecutive days of rally, as market sentiment remained buoyant ahead of the convening of China’s political ‘two sessions’

China announced that the annual ‘two sessions’, which was delayed this year due to the coronavirus outbreak, will be held on May 21 to showcase the country’s return to normalcy following the pandemic.

Tin was the best performer with a rebound of 3.17%. Copper added 0.25%, lead climbed 0.71%, nickel increased 1.15%, while zinc shed 0.42% and aluminium went flat. 

The ferrous complex mostly traded lower, as rebar eased 0.73%, hot-rolled coil dipped 0.55%, stainless steel fell 0.74%, coke lost 0.49% while iron ore extended its increase by 0.93%. 

China’s General Administration of Customs said on Wednesday that it will streamline the imports of iron ore and skip sampling inspection of product quality to improve trade facilitation. SMM expects the adjustment, taking effect on June 1, to cause little impact on the iron ore imports.

US benchmark oil futures expanded their rises, getting a lift from global supply cuts and signs of improving demand. 

Copper: The most-traded SHFE July contract continued to advance on loaded-up longs and departing shorts, rising to a session high of 43,920 yuan/mt and ending the day 0.25% higher at 43,730 yuan/mt. Resumed increases in crude oil prices lifted the red metal. The KDJ indicators expanded upwards, suggesting some further upward potential for prices tonight. The contract is expected to test pressure from 44,000 yuan/mt tonight.  

Aluminium: The most-liquid SHFE July contract climbed for the sixth straight day as it recovered overnight losses and hit a session high of 12,935 yuan/mt, before finishing at 12,875 yuan/mt. It held above all moving averages, but pressure remained from 13,000 yuan/mt. It is expected to continue to test resistance above from the Bollinger upper band tonight. 

Zinc: The most-active SHFE July contract relinquished gains from Tuesday with pressure from the daily moving average. It closed 0.42% lower on the day at 16,750 yuan/mt. Limited upward momentum may see the contract hover weakly tonight. 

Nickel: The most-traded SHFE July contract came off after climbed to a session high of 103,120 yuan/mt as longs booked profits and exited. The contract ended up 1.15% on the day at 102,580 yuan/mt, with open interest down 3927 lots. Tonight, the contract may stabilise at 102,000 yuan/mt and again test pressure above. 

Lead: The most-active SHFE July contract further trended upwards with strong support from 14,000 yuan/mt. It finished the day 0.71% higher at 14,090 yuan/mt, following an intraday high of 14,145 yuan/mt. Nonetheless, investors will remain cautious given limited support from fundamentals.

Tin: The most-liquid SHFE July contract regained losses from March as rising longs sent it to a session high of 135,390 yuan/mt before it ended up 3.17% on the day at 134,920 yuan/mt. It is expected to test resistance from 135,000 yuan/mt or 136,500-137,000 yuan/mt in the near term.