SMM Morning Comments (May 28): SHFE base metals broadly higher despite rising US-China tensions

SHANGHAI, May 28 (SMM) – SHFE nonferrous metals moved higher across the board on Thursday morning, while their counterparts on the LME rose for the most part as investors weighed optimism over the reopening of economies against rising tensions between the US and China.

A tumble in oil prices weighed on the nonferrous complex on Wednesday. LME nonferrous metals, except for aluminium, closed lower, with zinc shedding 2.4% on the day to lead the way down. Lead dropped 1.9%, nickel declined 1.7%, copper slipped 1.4% and tin dipped 0.1%.

SHFE nonferrous metals performed similarly on Wednesday night. Lead and zinc fell close to 0.7%, nickel and copper shed about 0.6%, tin sank nearly 0.3%, while aluminium rose 0.9%.

US stocks, meanwhile, extended their gains amid optimism surrounding economic reopenings.  

Copper: Three-month LME copper slipped to its lowest since May 18 at $5,246/mt in Northern American trading hours on Wednesday, before it recouped some losses to end down 1.37% at $5,295.5/mt. It is expected to move between $5,260-5,320/mt today.

The most active SHFE July contract climbed after touching a low of 43,320 yuan/mt in overnight trading, and closed down 0.57% at 43,600 yuan/mt. It is expected to move between 43,400-43,800 yuan/mt today, while spot premiums are expected to be firm at 160-200 yuan/mt as low inventories encourage traders to hold quotes firm after futures prices declined.

Aluminium: Three-month LME aluminium advanced to $1,534/mt, a high not seen since April 17, on Wednesday, before closing up 0.5% at $1,529.5/mt. It bucked the downtrend across the nonferrous complex, despite rising US-China tensions and growing LME aluminium inventories, and is expected to move between $1,500-1,540/mt today.

The most active SHFE July contract rose to its highest since March 16 at 13,090 yuan/mt in overnight trading, before ending up 0.89% at 13,080 yuan/mt. Despite the influx of imported materials, falling inventories and high spot premiums will keep SHFE aluminium firm, and the July contract is expected to trade between 12,900-13,300 yuan/mt today.

Zinc: Three-month LME zinc tumbled to a three-week trough of $1,909.5/mt in Northern American trading hours on Wednesday, before it recovered some ground to close down 2.4% at $1,935.5/mt.  Data showed that zinc stocks at LME-approved warehouses decreased 0.12%, or 150 mt to 106,150 mt as of May 27. LME zinc faces a stiff resistance confluence of the five- and 10-day moving averages, and is expected to move at $1,920-1,970/mt today.

The most-liquid SHFE July contract rebounded from a one-month low of 15,980 yuan/mt in overnight trading, and closed down 0.65% at 16,170 yuan/mt. The 40-day moving average offered support, while resistance was at the five-day one. The July contract is likely to trade at 16,000-16,500 yuan/mt today, while spot premiums for domestic 0# Shuangyan are to steady at 140-150 yuan/mt over the SHFE June contract. The pace of inventory decline will decide the magnitude of support to prices.  

Nickel: Three-month LME nickel plumbed its lowest in more than a week at $12,090/mt in Northern American trading hours on Wednesday, before it recovered some ground to end down 1.7% at $12,140/mt. Whether it could return above 12,200 will come under scrutiny.

The most-traded SHFE August contract extended losses from a lower open to a low of 99,390 yuan/mt in overnight trading, but it later clawed back some losses and closed down 0.61% at 99,990 yuan/mt. Whether it could break through 100,000 will come under scrutiny.

Lead: Three-month LME lead slipped to an intraday low of $1,626/mt in Northern American trading hours on Wednesday, and it later recouped some losses to close the day 1.91% lower at $1,642/mt. It is likely to extend its losses as it has lost support from the 10- and 20-day moving averages.

The most-liquid SHFE July contract rose after touching a session-low of 14,170 yuan/mt in overnight trading, and ended down 0.66% at 14,275 yuan/mt. Longs and shorts diverged at the five-day moving average, and whether the contract could remain above that level will come under scrutiny.

Tin: Three-month LME tin fluctuated to close a tad weaker at $15,325/mt on Wednesday. Support is still seen at 15,100/mt.

The most-traded SHFE July contract slipped to a session-low of 133,090 yuan/mt in overnight trading, before it recovered some ground to close down 0.25% at 133,790 yuan/mt. Resistance is seen at a previous high of 136,000 yuan/mt.