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SMM Morning Comments (May 29): LME base metals broadly lower with US-China tensions in focus
May 29,2020 09:52CST
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Source:SMM
LME nonferrous metals ticked broadly lower on Friday morning, as traders braced for an upcoming news conference on US-China relations from US President Donald Trump. On the SHFE, nonferrous metals also fell across the board before recovering some ground.

SHANGHAI, May 29 (SMM) – LME nonferrous metals ticked broadly lower on Friday morning, as traders braced for an upcoming news conference on US-China relations from US President Donald Trump. On the SHFE, nonferrous metals also fell across the board before recovering some ground.

 

US President Donald Trump said Thursday afternoon he would give a news conference Friday regarding China, knocking US stocks down from solid gains. That announcement came after China approved a national security bill for Hong Kong on Thursday.

Tensions between Washington and Beijing have risen lately, with trade, the coronavirus pandemic and now Hong Kong a focus in the dispute.

 

On Thursday, LME nonferrous metals, except for lead, closed higher, with copper advancing 1.4% to lead the way up. Tin rose 1.2%, nickel climbed 0.8%, aluminium gained 0.6% and zinc inched up 0.2%.

SHFE nonferrous metals performed similarly overnight. Tin rose close to 1%, copper crept up 0.8%, zinc advanced 0.7%, aluminium gained 0.4% and nickel edged up 0.2%, while lead shed 0.3%.

 

A rally in oil prices and a decline in the US dollar index gave a boost to the nonferrous complex on Thursday.

 

Copper: Three-month LME copper rallied 1.4% to $5,372/mt on Thursday. It is expected to move at $5,300-5,350/mt today.

The most active SHFE July contract strengthened 0.76% to 43,950 yuan/mt in overnight trading, and is expected to trade between 43,500-43,900 yuan/mt. Spot premiums are seen firm at 170-200 yuan/mt amid low inventories and weaker-than-expected arrivals of seaborne cargoes.

 

Aluminium: Three-month LME aluminium rose for a third straight day on Thursday, hitting a two-month peak of $1,541/mt before ending up 0.56% at $1,538/mt. Optimism over economic reopening offers support, while rising US-China tensions and supply pressure will weigh. LME aluminium is expected to move between $1,520-1,560/mt today.

The most active SHFE July contract fluctuated to close 0.38% higher at 13,155 yuan/mt in overnight trading. Falling inventories and high spot premiums underpin SHFE aluminium prices, but concerns over the ramp-up of new capacity and uncertainties over the sustainability of consumption robustness are growing. The July contract is expected to remain firm in the short term and trade between 13,000-13,400 yuan/mt today.

 

Zinc: Three-month LME zinc plumbed its lowest in more than three weeks at $1,903.5/mt in early European trading hours on Thursday. It later rebounded to close 0.23% higher at $1,940/mt, facing resistance at the five-day moving average. Data showed that zinc stocks at LME-approved warehouses extended their decline, decreasing 2.73%, or 2,900 mt to 103,250 mt as of May 28. LME zinc is expected to move at $1,910-1,960/mt today as investors weigh demand recovery overseas against US-China tensions.

The most-liquid SHFE July contract advanced 0.65% to 16,230 yuan/mt in overnight trading, and is likely to test the five-day moving average in the short term. It is expected 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. The pace of inventory decline should be closely watched to assess the magnitude of boost to consumption from Beijing’s stimulus efforts.

 

Nickel: Three-month LME nickel fluctuated to close 0.82% higher at $12,240/mt on Thursday. It is expected to remain rangebound and test pressure at 12,300 in the near term.

The most-traded SHFE August contract reversed earlier gains to a session-low of 100,040 yuan/mt in overnight trading, before it clawed back some losses to close 0.16% higher at 100,370 yuan/mt. It now faces a resistance confluence of the five- and 10-day moving averages.

 

Lead: Three-month LME lead slipped to a low of $1,625/mt before it recovered some ground to close 0.3% weaker at $1,637/mt on Thursday.

The most-liquid SHFE July contract touched a session-low of 14,200 yuan/mt before it recouped some losses to end 0.32% lower at 14,235 yuan/mt in overnight trading.

 

Tin: Three-month LME tin rose 1.2% to end at $15,535/mt on Thursday. Support is seen at the five-day moving average, while resistance is at a previous high of $15,700/mt.

The most-traded SHFE August contract advanced 0.96% to 134,150 yuan/mt in overnight trading. It is supported by the five-day moving average, while resistance is seen at 135,000.

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