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SMM Morning Comments (May 26): Base metals mixed with US-China tensions, vaccine hopes in focus
May 26, 2020 09:45CST
Source:SMM
Nonferrous metals traded mixed on Tuesday morning as investors weighed rising tensions between the US and China against mounting optimism about a potential coronavirus vaccine.

SHANGHAI, May 26 (SMM) – Nonferrous metals traded mixed on Tuesday morning as investors weighed rising tensions between the US and China against mounting optimism about a potential coronavirus vaccine.

 

Investors will also continue to watch for developments from China’s National People’s Congress (NPC)—the country’s annual session of parliament.

 

SHFE nonferrous metals got off to a strong start overnight, but eased later in the session and end mixed. Lead and copper advanced about 0.6%, aluminium gained 0.2%, while nickel inched down 0.06%, zinc fell 0.4% and tin shed 0.6%.

 

The LME was closed on Monday for spring bank holiday. Zinc shed more than 1% as of 9:36 Beijing time on Tuesday to be the worst performer after trading was resumed. Nickel and tin also weakened, while aluminium, copper and lead drifted higher. Their losses or gains were smaller than 1%.

 

Expectations into the NPC meetings were high among metal industry participants, particularly in regards to more expectations around stimulus. However so far there is little in the way of major new announcements, just more of a reconfirmation of existing supporting policies.

 

American biotech company Novavax said Monday it started the first human study of its experimental coronavirus vaccine. The company said it expects initial results on safety and immune responses in July. That comes on the back of Moderna’s recent report of a positive development in its vaccine trial where all 45 participants had developed coronavirus antibodies.

 

White House National Security Advisor Robert O’Brien said Sunday the US will likely impose sanctions on China if Beijing implements national security law that would give it greater control over autonomous Hong Kong.

 

The US dollar index, which tracks the greenback against a basket of its peers, were little changed on Tuesday morning, while oil prices moved higher.

 

Copper: The most active SHFE July contract eased after posting a higher open in overnight trading, and ended 0.55% higher at 43,690 yuan/mt.

 

Aluminium: The most active SHFE July contract eased off a session-high of 12,875 yuan/mt to close 0.16% firmer at 12,845 yuan/mt in overnight trading. A continued fall in social inventories and firm spot premiums support near-dated SHFE aluminium contracts, while expectations of greater supply and weaker demand weigh on later-dated contracts. The July contract is expected to move between 12,600-13,000 yuan/mt today.

 

Zinc: The most-liquid SHFE July contract jumped to a session-high of 16,470 yuan/mt in early trade overnight. It later eased and gave back all those gains to close 0.4% lower at 16,285 yuan/mt. Resistance was at the 20-day moving average, while the middle Bollinger band offered support. With little in the way of major new announcements from China’s two sessions, and a slowdown in social inventory decline, zinc prices pulled back. Whether ore supply concerns could remain supportive of prices will come under scrutiny. The July contract is likely to trade at 16,100-16,600 yuan/mt today, while spot premiums for domestic 0# Shuangyan are to steady at 140-160 yuan/mt over the SHFE June contract.

Three-month LME zinc is expected to move at $1,950-2,000/mt today.

 

Nickel: The most-traded SHFE July contract fluctuated to close a tad weaker at 100,830 yuan/mt in overnight trading. It now faces pressure at the 20-day moving average and the middle Bollinger band. Whether prices of nickel pig iron (NPI) could remain firm on the back of a narrowing in stainless steel profits, and how overseas demand recovery fares should be closely watched in the near term.  

 

Lead: The most-liquid SHFE July contract hovered to hold onto the majority of gains from a higher open in overnight trading, gaining 0.6% to end at 14,320 yuan/mt. It has been on the rise and is likely to test highs recorded in early March and late February given the risks of a short squeeze amid low inventories.

 

Tin: As longs trimmed their positions, the most-traded SHFE July contract slipped to a session-low of 132,380 yuan/mt before recovering some ground to close 0.59% lower at 133,160 yuan/mt in overnight trading. Support is seen at the 130,000 mark.

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