SMM Evening Comments (Jun 2): Shanghai base metals extended rises on reopening hopes

SHANGHAI, Jun 2 (SMM) – SHFE nonferrous metals, except for aluminium, closed higher across the board on Tuesday June 2, extending the price rally from Monday, as investors continued to focus on the progress of economic reopening. 

The increases on Tuesday were limited and mostly below 1% as the reopening and recovery optimism partially eased amid the ongoing escalation of tensions between China and the US. 

Nickel led the gains with a rise of 1.36%. Copper advanced 0.7%, lead added 0.59%, zinc climbed 0.57%, tin rose 0.2%, while aluminium shed 1.06%. 

The ferrous complex also traded mostly higher as iron ore extended its rally and added 0.07%. Rebar climbed 1.51%, hot-rolled coil increased 0.73%, coke rose 1.63%, while stainless steel fell 0.08%. 

SMM data showed that a total of 89 vessels carrying 14.94 million mt of iron ore arrived at major Chinese ports during May 24-30. This was up 1.57 million mt from the prior week.

China’s steelmaking hub Tangshan has unveiled a plan for air quality control in June, but most local steel mills have not adopted substantial anti-smog measures, SMM learned.

Nonetheless, some market participants and steelmakers in Tangshan anticipate tougher curbs will be imposed in the future. SMM calculations showed that strict implementation of anti-smog measures outlined in the plan will affect pig iron production by 86,900 mt/day (2.61 million mt/month).

Copper: The most-traded SHFE July contract trimmed some increases from overnight as it came off after hitting a session high of 44,800 yuan/mt right after opening, ending the day 0.7% higher at 44,560 yuan/mt. Longs covered their positions, leading to a decline of 3,065 lots in open interest. The KDJ indicators continued to expand upwards, signalling further upward potential in the contract tonight. 

Aluminium: The most-liquid SHFE July contract extended losses from Monday as loaded-up shorts sent it to a session low of 13,000 yuan/mt, before it closed the day 1.06% lower at 13,025 yuan/mt. The market expects consumption to weaken in June as the declines in domestic aluminium inventories slowed down. Before the release of SMM inventory data on Thursday, the contract is expected to consolidate around 13,000 yuan/mt. 

Zinc: The most-active SHFE July contract recovered decline as it bounced back from an intraday low of 16,535 yuan/mt, closing the day 0.57% higher at 16,620 yuan/mt. With support from bullish demand prospects, the contract will likely hold firm above all moving averages tonight. 

Lead: The most-active SHFE July contract gave up gains from overnight and finished the day 0.59% higher at 14,495 yuan/mt, following a session low of 14,420 yuan/mt. It is expected to test support from the five-day moving average tonight with its LME counterpart facing pressure from the 60-day moving average.