SMM Morning Comments (May 27): Shanghai base metals opened higher Wednesday amid increased risk appetite

SHANGHAI, May 27 (SMM) – SHFE nonferrous metals, except for nickel, opened Wednesday higher as optimism about more supportive measures from China’s government and a reopening world economy helped investors shrug off Chinese-US tensions.

The increases were relatively limited and below 1%. Nickel, meanwhile, extended losses from overnight and edged lower.  

Overnight, LME base metals ended mostly higher as copper and aluminium advanced nearly 1.2%, nickel gained close to 0.6%, while tin edged lower and zinc lost 0.1%. Copper once increased as much as 2% as investors anticipated that more stimulus measures from China will bolster demand for the nonferrous metals. 

SHFE nonferrous metals extended their increases for the most part last night. Lead added 1.3%, tin climbed 1%, copper grew 0.3%, aluminium rose 0.1%, zinc inched up, while nickel shed 0.3%.

Crude oil prices rose on Tuesday, lifted by growing confidence that producers are following through on commitments to cut supplies and as fuel demand picks up with coronavirus restrictions easing.

Copper: Three-month LME copper retreated after advanced, buoyed by improved market sentiment on economic reopening. It finished the day 0.48% higher on the day at $5,369/mt, following an intraday high above $5,400/mt. With support from macroeconomic development, copper prices are expected to move higher today with LME copper at $5,340-5,400/mt and the most-liquid SHFE contract at 43,600-44,100 yuan/mt. Spot premiums also expanded amid a downward trend of domestic inventories. Premiums are likely between 180-210 yuan/mt today. 

Aluminium: Three-month LME aluminium climbed and found steady support from $1,520/mt, ending the day 1.2% higher at $1,521.5/mt. Bullish prospects for demand may keep prices between $1,500-1,540/mt today. The most-traded SHFE July contract rose for the third consecutive day and settled at 12,940 yuan/mt, up 0.78% on the day. Healthy profits and brisk consumption continued to promote the commissioning of new capacity in China. Today, the contract will likely move between 12,700-13,100 yuan/mt. 

Zinc: Three-month LME zinc continued to move sideways as it rebounded after a weakened SHFE zinc weighed it to a session low of $1,960/mt. It finished the day 0.1% lower at $1,983/mt, with LME zinc inventories falling 300 mt to 106,275 mt, staying at high levels. The development of operations recovery at overseas mines will be closely monitored and further suspension will continue to support zinc prices. Today, LME zinc is expected to trade between $1,950-2,000/mt with the most-active SHFE July contract hovering at 16,200-16,700 yuan/mt. 

Nickel: Three-month LME nickel hovered in a broad range with support from the 20-day moving average or $12,240/mt and pressure from the five-day moving average. It closed the day at $12,415/mt, up 0.57% on the day. The most-liquid SHFE August contract once fell below 100,000 yuan/mt before it ended overnight lower at 100,780 yuan/mt. The contract is expected to consolidate above 100,000 yuan/mt with LME nickel trading with pressure from the 10-day moving average today. 

Lead: Three-month LME lead extended its rangebound trend at lows even as it gained 1.61% on the day to end at $1,674/mt. The most-liquid SHFE contract rose to a session high of 14,495 yuan/mt and closed up 1.3% at 14,480 yuan/mt. Pressure above from 14,500 yuan/mt will be watched today. 

Tin: Three-month LME tin recovered after it dipped to a session low of $15,295/mt, ending the day $5/mt lower at $15,375/mt, with LME tin inventories falling 140 mt to 3,190 mt. It is seen trading with support from $15,100/mt with the most-active SHFE contract facing pressure from 136,000 yuan/mt today.