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SMM Morning Comments (May 21): Base metals seesawed ahead of ‘two sessions;’ SHFE nickel jumped more than 3%
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May 21,2020

SHANGHAI, May 21 (SMM) – Nonferrous metals on the SHFE and LME experienced volatile trading Thursday morning as investors look ahead to China’s “two sessions” and monitor the continued rally in oil prices.


LME base metals moved between positive and negative territory in the morning of Asian trading hours Thursday, after broad gains in the previous session. On Wednesday, nonferrous metals on the LME rose across the board, with nickel and aluminium both advancing about 1.8% to lead the way up. Copper jumped 1.7%, zinc and lead rose 0.8% and tin gained 0.3%.


On the SHFE, base metals, except for nickel and tin, were barely changed. Nickel surged more than 3% before it turned around to move lower.

SHFE base metals, except for zinc, rose in overnight trading. Nickel surged 2.2% to be the best performer, copper climbed 1.5%, tin rose 0.9%, lead and aluminium both gained about 0.7%, while zinc fell close to 0.7%.


China's "two sessions," a key event in the country's political calendar, will open on Thursday afternoon, after being postponed by two months due to COVID-19. The world will watch how China charts the course for a crucial year to build a moderately prosperous society in all respects and achieve its development goals, while effectively warding off coronavirus risks.


The US dollar index rose slightly on Thursday morning, after touching its lowest since May 1 at 99.0014 overnight, while oil prices continued their ascent.


Copper: Three-month LME copper crept up to its highest since March 13 at $5,455/mt on Wednesday, before closing up about 1.7% at $5,445.5/mt. It is expected to trade between $5,430-5,490/mt today.

The most active SHFE July contract notched a 10-week peak of 44,420 yuan/mt in overnight trading, before ending up 1.51% at 44,360 yuan/mt. It is expected to move between 44,300-44,700 yuan/mt today, with spot premiums of 180-210 yuan/mt.


Aluminium: Three-month LME aluminium resumed its rally on Wednesday, gaining 1.78% to end at a three-week peak of $1,515/mt. Optimism surrounding economic recovery is expected to bolster LME aluminium to $1,490-1,530/mt today.

The most active SHFE July contract advanced 0.66% to end at its highest in more than two months at 12,955 yuan/mt in overnight trading. Firm spot premiums and falling inventories will remain supportive of the July contract, which is expected to move at 12,800-13,200 yuan/mt today.


Zinc: Three-month LME zinc jumped in North American trading hours on Wednesday, clawing back losses caused by a large increase in LME inventories. It hit its highest since May at $2,053.5/mt, before closing up 0.76% at $2,044.5/mt. Data showed that zinc stocks at LME-approved warehouses rose 9.05% or 8,900 mt to 107,275 mt as of May 20, which sparked concerns that demand recovery is not as strong as expected. The contract is expected to trade at $2,010-2,060/mt today.

The most-liquid SHFE July contract slipped to a session-low of 16,490 yuan/mt before recovering some ground to close down 0.65% at 16,695 yuan/mt in overnight trading. It remains above the five-to-10 day moving averages. With an upbeat demand outlook, the July contract is likely to remain at 16,500-17,000 yuan/mt today, while spot premiums for domestic 0# Shuangyan are to steady at 140-160 yuan/mt over the SHFE June contract.


Nickel: Three-month LME nickel surged 1.84% to end at its highest since March 13 at $12,710/mt on Wednesday, moving out of its recent range. Whether it could remain above 12,700 will come under scrutiny.

A long position buildup of more than 10,000 lots gave a swift lift to the most-traded SHFE July contract in overnight trading, which gained 2.19% to end at 104,790 yuan/mt, highs in three months. Whether it could break the 104,800 mark will come under scrutiny today.


Lead: Three-month LME lead reversed an earlier slip to its highest since April 17 at $1,703/mt on Wednesday, before it ended up about 0.3% at $1,694/mt.

The most-liquid SHFE July contract rose to its highest since March 13 at 14,230 yuan/mt before easing to close up 0.71% at 14,150 yuan/mt.


Tin: Three-month LME tin hit a five-week high of $15,595/mt on Wednesday, before erasing some gains to close up some 0.8% at $15,465/mt.

The most-traded SHFE July contract strengthened 0.94% to 134,820 yuan/mt in volatile trading overnight.

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