SMM Evening Comments (Jun 5): Shanghai base metals ended mostly higher Friday, nickel rallied 1%

SHANGHAI, Jun 5 (SMM) – SHFE nonferrous metals, except for lead, closed marginally higher on Friday June 5, recovering losses from early trades given a broad rally in the afternoon session. 

Nickel was the best performer with a rise of 0.98%. Copper advanced 0.96%, aluminium climbed 0.08%, zinc rose 0.12%, tin grew 0.07%, while lead shed 0.07%. 

The ferrous complex traded mostly lower on Friday as iron ore closed 0.93% lower. Rebar shed 1.15%, hot-rolled coil fell 0.48%, coke eased 0.84%, while stainless steel climbed 0.23%. 

SMM data showed that inventories of seaborne iron ore at Chinese ports edged higher this week, after seven consecutive weeks of declines, as improved demand was offset by greater arrivals.

Crude oil futures traded higher following news that the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, a group known as OPEC+, will meet on June 6 to discuss extending a deal on oil output cuts.

Copper: The most-traded SHFE July contract recovered decline from Thursday as it climbed above the daily moving average to finish the day 0.96% higher at 45,220 yuan/mt, with open interest rising 2,891 lots to 104,000 lots as longs loaded up their positions. With the KDJ indicators expanding upwards and an elevated LME copper above $5,620/mt, the July contract is expected to further expand and test support from 46,000 yuan/mt tonight. 

SMM data showed that copper inventories in three major consumption areas in China extended their slide this week, falling for the 12th consecutive week as of June 5, but the overall decline narrowed from a week ago and stocks in Shanghai rebounded amid slower consumption. 

Aluminium: The most-liquid SHFE July contract broke up the five- and 10- day moving averages to hit a session high of 13,225 yuan/mt, ending the day 0.08% higher at 13,180 yuan/mt. The further downtrend in domestic inventories of primary aluminium this week together with pessimistic demand prospects for June kept the contract above 13,000 yuan/mt. The contract may continue to edge higher tonight with its LME counterpart. 

Zinc: The most-active SHFE July contract regained early losses as investors added their long positions when prices slipped to a session low around 16,520 yuan/mt. SMM data showed that zinc inventories in China rose this week, due to concentrated arrivals and weaker demand, but an absence of supply increase from overseas miners continued to support zinc prices. SMM expects the contract to hover robustly tonight as its LME counterpart strengthened during the European trading hours. 

Nickel: The most-traded SHFE July contract traded higher with its LME counterpart, as it climbed to test pressure from 104,000 yuan/mt before closing the day 0.98% higher at 103,790 yuan/mt. Open interest grew 4817 lots to 118718 lots as investors loaded up bullish positions. Tonight, pressure above from the Bollinger upper band will be monitored. 

Nickel ore inventories across all Chinese ports continued to fall this week, decreasing 20,000 wmt from a week earlier to 7.83 million wmt as of Friday June 5, showed SMM data.

Lead: The most-active SHFE July contract bounced back amid a broad rally in base metals in the afternoon session, but it failed to end higher on the day as it stemmed increase at 14,445 yuan/mt, closing the day slightly lower at 14,390 yuan/mt. The contract has slowed its decline from the previous session but any upward momentum will be capped given pressure above from the five-day moving average. 

SMM data showed that social inventories of lead ingots in China extended their increase this week, driven by weak consumption from the lead-acid battery market, continued arrivals of imported lead and ample supply of secondary lead. 

Tin: The most-active SHFE August contract moved higher after pressure from shorts sent it to a session low of 133,800 yuan/mt, closing the day 0.07% higher at 134,700 yuan/mt. Support below is seen from 134,000 yuan/mt with resistance above expected at 135,000 yuan/mt tonight.