SMM Evening Comments (Jun 4): Shanghai base metals mostly fell after three days of rally

SHANGHAI, Jun 4 (SMM) – SHFE nonferrous metals, except for aluminium, declined across the board on Thursday June 4, giving up gains from the previous three days, as investors continued to monitor the threat of the coronavirus pandemic and rising tensions between China and the US. 

Tin led the losses with a drop of 1.83%. Copper shed 0.4%, lead fell 1.65%, zinc dipped 0.57%, nickel slipped 1.55%, while aluminum gained 0.5%. 

The ferrous complex also traded mostly lower as iron ore failed to hold onto early gains and closed down 2.12%. Rebar declined 0.93%, hot-rolled coil went down 1.66%, stainless steel decreased 1.76%, while coke climbed 1.39%.

Coke producers in Anyang, Henan province should halve the production capacity of their 4.3m coke ovens from July 1, the local government said Thursday. 

Crude oil futures declined on Thursday due to uncertainty about the timing and scale of a potential extension to the agreement between the OPEC and its allies to cut crude supplies.

Separately, the Energy Information Administration (EIA) reported that crude oil inventories dropped by 2.1 million barrels to 532.2 million barrels for the week ended May 29.

Copper: The most-traded SHFE July contract relinquished gains from the prior five sessions as it extended losses from overnight and slipped to an intraday low of 44,570 yuan/mt, finishing the day at 44,720 yuan/mt, down 0.4% on the day. Open interest shrank 379 lots to 101,000 lots as longs covered their positions. With continued support from the five-day moving average, the contract will likely track its LME counterpart and test pressure from 45,000 yuan/mt. 

Aluminium: Loaded-up longs lifted the most-liquid SHFE July contract while other base metals declined. The contract pared some gains after rising to a session high of 13,230 yuan/mt, ending the day 0.5% higher at 13,165 yuan/mt. 
SMM data showed that social inventories of primary aluminium ingots in China continued to shrink this week, but the decline was much smaller than a week ago and this reinforced concerns about weakness in consumption. The July contract may move sideways around 13,000 yuan/mt in the near term. 

Zinc: The most-active SHFE July contract tested support from the five- and 20- day moving averages and finished the day 0.57% lower at 16,530 yuan/mt. As the slow season sets in, grim demand prospects may keep the contract weak tonight. 
The latest SMM survey showed that 474,100 mt of refined zinc was produced in China in May, down 1.14%, or 5,500 mt, from a month ago and down 1.26% from a year earlier.

Nickel: The most-active SHFE August contract extended losses from overnight with pressure from loaded-up shorts, ending the day 1.55% lower at 102,190 yuan/mt. It lost support from the five-day moving average with decreased confidence in longs. Tonight, pressure from the 10- and 20- day moving averages and 101,500 yuan/mt will be monitored. 

Lead: The most-active SHFE July contract extended decline from the previous day as longs continued to exit. It finished the day 1.65% lower at 14,285 yuan/mt with open interest down 400 lots to 29,317 lots. As LME lead accelerated decline during the European trading hours, the contract may further weaken tonight. 

Tin: The most-liquid SHFE August contract closed the day 2,490 yuan/mt lower at 133,650 yuan/mt, following after departing longs and rising shorts sent it to a session low of 133,330 yuan/mt. Support below is seen from the 20-day moving average or 131,500 yuan/mt.