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SMM Morning Comments (May 22): Base metals broadly lower with US-China tensions, ‘two sessions’ in focus; SHFE nickel hit ‘limit down’ overnight
May 22,2020 10:02CST
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Source:SMM
Nonferrous metals on both the SHFE and LME fell across the board on Friday morning as investors monitor rising tensions between the US and China as well as developments from China’s “two sessions.” Losses in oil prices and dismal economic data released recently also gave a hit to the nonferrous complex.

SHANGHAI, May 22 (SMM) – Nonferrous metals on both the SHFE and LME fell across the board on Friday morning as investors monitor rising tensions between the US and China as well as developments from China’s “two sessions.” Losses in oil prices and dismal economic data released recently also gave a hit to the nonferrous complex.

 

SHFE nickel bucked the downtrend, however, rising to claw back losses from overnight trading. The contract for July delivery plunged 8% to hit its “limit down” level at a five-week low of 96,070 yuan/mt overnight.

 

Overnight on the SHFE, zinc and tin slipped 1.5%, copper declined 0.7% and lead lost 0.5%, while aluminium advanced 0.3%.

 

Nonferrous metals, except for aluminium, on the LME pulled back on Thursday, with zinc diving 3.7% to lead the way down. Lead tumbled 2.4%, nickel dropped 2.3%, copper fell 1% and tin shed 0.4%, while aluminium gained 0.4%.

 

China's "two sessions," a key event in the country's political calendar, kicked off 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.

 

Chinese Premier Li Keqiang said in an English-language text of the work report he was set to deliver on Friday that China will not set a target for its economic growth this year due to uncertainties about the impact of the coronavirus.

 

The US dollar index, which measures the greenback’s strength against a basket of currencies, was little changed on Friday morning, holding onto gains from Thursday’s rebound which snapped a three-day losing streak.

 

Oil prices, meanwhile, stemmed their recent gains and moved lower.

 

Copper: Three-month LME copper came off from more than two-month highs on Thursday, losing 1% to $5,390/mt. It is expected to trade between $5,350-5,400/mt today.

The most active SHFE July contract slipped to a session-low of 43,760 yuan/mt, before ending down 0.7% at 43,890 yuan/mt in overnight trading. It is expected to move between 43,600-44,000 yuan/mt today, while spot premiums are expected to shrink to 150-180 yuan/mt as sellers will be keen to cash in amid greater inflows of imports.

 

Aluminium: Three-month LME aluminium rose for a second straight day Thursday, advancing to a one-month high of $1,524.5/mt before ending up 0.4% at $1,521/mt. Optimism surrounding economic recovery that will boost demand, coupled with arbitrage trades, is expected to remain supportive of LME aluminium, which is expected to move at $1,490-1,530/mt today.

The most active SHFE July contract bucked the downtrend across the nonferrous complex and rose to end at a session-high of 12,880 yuan/mt overnight, up 0.27% on the day. It is expected to move at 12,700-13,100 yuan/mt today. In the physical market, inflows of imported aluminium ingots and sell-offs by some sellers depressed spot premiums.

 

Zinc: Three-month LME zinc fell sharply Thursday, shedding 3.69% to $1,969/mt and giving back much of gains from the three-day winning streak. It has declined below the 10-day moving average, and sees immediate support at the 20-day one. Data showed that zinc stocks at LME-approved warehouses resumed their decline, decreasing 0.42% or 450 mt to 106,825 mt as of May 21, after a sharp increase in the previous day. The contract is expected to trade at $1,940-1,990/mt today.

The influx of shorts knocked the most-liquid SHFE July contract to a one-week low of 16,240 yuan/mt in overnight trading, before the contract recouped some losses to end down 1.47% at 16,375 yuan/mt. The market appears to have priced in optimism surrounding China’s “two sessions”, and that, combined with a slowdown in the inventory decline weighed on morale among longs. The July contract is likely to trade at 16,300-16,800 yuan/mt today, while spot premiums for domestic 0# Shuangyan are to steady at 140-150 yuan/mt over the SHFE June contract.

 

Nickel: Three-month LME nickel rose to its highest since March 10 at $12,910/mt on Thursday, before it followed its SHFE counterpart lower and closed the day 2.28% lower at $12,420/mt.

The most-traded SHFE July contract plunged 8% to hit its “limit down” level at a five-week low of 96,070 yuan/mt in the final minutes of overnight trading, due to a large draw in long positions. Overnight’s plunge came even as there was no big news on fundamentals nor macroeconomics.   

 

Lead: Three-month LME lead slipped to an intraday low of $1,642/mt, shortly before closing down 2.36% at $1,654/mt on Thursday. It faces stiff pressure at highs, and struggles to move out of its recent range.  

The most-liquid SHFE July contract tested the previous session’s high of 14,280 yuan/mt, before falling to end 0.49% lower at 14,090 yuan/mt in overnight trading.

 

Tin: Three-month LME tin rose to its highest since March 17 at $15,735/mt, before moving lower to end down 0.4% at $15,405/mt on Thursday. Support is seen at the 60-day moving average at $15,100/mt.

The most-traded SHFE July contract slid 1.47% to end at a session-low of 133,010 yuan/mt overnight. Support is seen at a previous high of 132,000 yuan/mt.

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