SMM Morning Comments (Jun 4): LME base metals mostly edged down in volatile trading

SHANGHAI, Jun 4 (SMM) – LME nonferrous metals eased for the most part on Thursday morning, as oil prices stemmed their recent rally and the US dollar recovered slightly.

Copper, aluminium, zinc and nickel on the LME were lower in volatile trading in the morning of Asian trading hours on Thursday, while lead resumed its rally.   

LME nonferrous metals closed mixed on Wednesday. Aluminium rose 0.4%, tin and zinc gained 0.3%, while lead dipped nearly 0.1%, copper shed 0.2% and nickel fell 0.7%.

SHFE nonferrous metals, except for aluminium, weakened in overnight trading. Tin slipped 0.8% to lead the losses, nickel fell 0.7%, lead lost 0.4%, copper shed 0.2% and zinc edged down 0.1%.

Oil moved between gains and losses in a volatile trading session on Wednesday, as demand continues to improve, but as doubts emerged about the timing and scale of a potential extension to the pact between OPEC and its allies to cut crude supplies.

The US dollar eased further on Wednesday while stocks on Wall Street posted yet another robust day, as better-than-expected economic data bolstered optimism over the recovery from coronavirus-led shutdowns.

Copper: Three-month LME copper fluctuated to close down 0.18% at $5,508.5/mt on Wednesday. It held onto 12-week highs and is expected to move at $5,450-5,520/mt today.

The most active SHFE July contract fell 0.16% to 44,830 yuan/mt in overnight trading. It is expected to remain ranegbound and trade between 44,500-45,000 yuan/mt today. Spot premiums are expected to ease to 70-100 yuan/mt due to the influx of imported cargoes.

Aluminium: Three-month LME aluminium notched a new 10-week peak of $1,570/mt in Northern American trading hours on Wednesday, before closing up 0.42% at $1,565.5/mt. Doubts over whether demand recovery overseas could justify the recent rally in aluminium prices will keep market sentiment in check, and the contract is expected to hover between $1,550-1,570/mt.

The most active SHFE July contract opened higher and oscillated in a tight range to end overnight up 0.38% at 13,150 yuan/mt. It is expected to move between 13,050-13,300 yuan/mt today, while spot premiums are seen 100-120 yuan/mt over the June contract. SMM will release its weekly China primary aluminium ingot inventory data on Thursday, which is expected to register another decline.

Zinc: Three-month LME zinc gained 0.27% to $2,016.5/mt on Wednesday, after plumbing a session-low below 2,000 in the afternoon of Asian trading hours. Data showed that zinc stocks at LME-approved warehouses extended their decline, dipping 0.05% or 50 mt to 97,800 mt as of June 3. Slow resumption of mines and optimism surrounding demand recovery and economic reopening supported zinc prices. LME zinc is expected to move at $1,990-2,040/mt today.

The most-liquid SHFE July contract shed 0.12% to 16,605 yuan/mt in a volatile trading session overnight. It remains above the five- and 20-day moving averages, and investors are rolling to later-dated contracts, narrowing price spreads between contracts. Concerns that there is a long way to go for the economy to recover from the devastation caused by the Covid-19 crisis will keep sentiment in check. The SHFE July contract is expected to trade at 16,300-16,800 yuan/mt today, while spot premiums for domestic 0# Shuangyan are seen lower at 80-110 yuan/mt over the SHFE June contract.

Nickel: Three-month LME nickel closed down 0.66% at $12,790/mt in a volatile trading session on Wednesday. It is expected to remain rangebound in the near term with strong resistance at 13,000.

The most-traded SHFE August contract slipped to a session-low of 102,230 yuan/mt in overnight trading, before it recovered some ground to end down 0.66% at 103,110 yuan/mt. Whether it could remain above 103,000 will come under scrutiny in the short term.

Lead: Three-month LME lead edged down 0.09% to $1,716/mt in volatile trading on Wednesday.

The most-liquid SHFE July contract lost 0.38% to 14,470 yuan/mt in overnight trading, taking a breather from its recent rally. Recent trading activities indicate that lead inventories in China are likely to begin an uptrend in the short term.

Tin: Three-month LME tin advanced 0.31% to $16,000/mt on Wednesday, after hitting a high of 16,115 earlier in the session, the highest since March 13. Resistance is seen at 16,500.

The most-traded SHFE August contract slid to a session-low of 134,200 yuan/mt in overnight trading due to the withdrawal of some longs. It later recouped some losses to end down 0.76% at 135,100 yuan/mt. Support is seen at the 10-day moving average at 133,500.