SMM Morning Comments (Jun 5): Base metals mostly lower as Wall Street snapped winning streak

SHANGHAI, Jun 5 (SMM) – Nonferrous metals on the LME and SHFE cruised mostly lower on Friday morning, as a stocks rally on Wall Street appeared to run out of steam.

Oil prices dipped in the morning of Asian trading hours as investors awaited a decision from top crude producers on whether to extend record output cuts.

The nonferrous complex got off to a weak start on the last trading day of the week despite the European Central Bank’s Thursday’s announcement of a larger-than-expected expansion of its coronavirus stimulus program.

LME nonferrous metals, except for aluminium, closed higher on Thursday. Lead jumped 1.3% to lead the gains, zinc rose 0.5%, copper gained 0.3%, tin inched up 0.2% and nickel edged up 0.04%.

SHFE nonferrous metals traded mixed, seeing moderate gains or losses, in overnight trading. Copper rose 0.4%, nickel climbed 0.3% and tin nudged up nearly 0.1%, while zinc shed 0.2%, aluminium and lead lost 0.4%.

Copper: Three-month LME copper gained 0.3% to $5,525/mt, after touching a session-low of $5,448.5/mt in the final hour of Asian trading time.

The most active SHFE July contract strengthened 0.36% to 44,950 yuan/mt in overnight trading.

Aluminium: Three-month LME aluminium fluctuated to close a tad lower at $1,564.5/mt on Thursday.

The most active SHFE July contract slipped to a session-low of 13,090 yuan/mt in overnight trading before recovering some ground to close down 0.38% at 13,120 yuan/mt. SMM data released Thursday showed another deceleration in the decline of social inventories of primary aluminium ingots in China this week.

Zinc: Three-month LME zinc rallied after dropped to a session-low of $1,984/mt in the final hour of Asian trading time, and finished the day 0.52% higher at $2,027/mt. Data showed that zinc stocks at LME-approved warehouses extended their decline, dipping 1.56% or 1,525 mt to 96,275 mt as of June 4. 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.

Tracking the rally in LME zinc, the most-liquid SHFE July contract notched the previous session’s high of 16,710 yuan/mt in early trade overnight. It later eased to end down 0.21% at 16,580 yuan/mt, near the 20-day moving average. Lower spot premiums amid high futures prices failed to spur trades in the physical market, providing little support to futures. The ratio of SHFE zinc prices to LME zinc fell as LME zinc outperformed its SHFE counterpart of late. The SHFE July contract is expected to trade at 16,200-16,700 yuan/mt today, while spot premiums for domestic 0# Shuangyan are seen steady at 90-100 yuan/mt over the SHFE June contract.

Nickel: Three-month LME nickel rose to close a tad higher at $12,795/mt, after plumbing a session-low of $12,530/mt in the final hour of Asian trading hours. Thursday’s low was below the five-day moving average and near the 10-day one, and pressure is seen at the upper Bollinger band.   

The most-traded SHFE August contract climbed past the five-day moving average to a session-high of 103,650 yuan/mt in overnight trading, before it eased to end up 0.26% at 103,050 yuan/mt. Whether it could remain above 103,000 will come under scrutiny after the release of US nonfarm payrolls report.

Lead: Three-month LME lead rose in European and Northern American trading hours, recouping earlier losses to a new nearly eight-week high of $1,744.5/mt before closing 1.31% higher at $1,738.5/mt. LME lead rose in the four of the past five sessions, bringing the SHFE/LME price ratio further down.   

The most-liquid SHFE July contract lost 0.38% to 14,345 yuan/mt in volatile trading overnight. SHFE lead appears to have been derailed from its recent uptrend, but its strong LME counterpart will offer support.

Tin: Three-month LME tin reversed an earlier slip to end up 0.16% at $16,025/mt on Thursday. It remains above the five-60 day moving averages, and resistance is seen at 16,500.

The most-traded SHFE August contract ended a touch higher at 134,730 yuan/mt, recovering from earlier losses, in overnight trading, thanks to support at the 10-day moving average. Resistance is seen at a previous high of 137,000.