SMM Evening Comments (Jun 8): SHFE base metals closed mostly higher as oil recovered from an earlier slip; aluminium jumped 2%

SHANGHAI, Jun 8 (SMM) – SHFE nonferrous metals, except for zinc and lead, closed higher on Monday, as oil prices recovered from an earlier slip amid optimism over major crude producers’ deal to extend record output cuts.

Aluminium surged 2% on the day to be the best performer, as SMM data showed that social inventories of primary aluminium ingots in China continued to trend lower over the weekend, moving towards the 800,000 mt level.

Tin jumped 1.9%, copper advanced 1.7% and nickel rose 0.5%, while lead edged down less than 0.1%. Both aluminium and copper hit their highest since March 3. Zinc shed 0.6% as SMM data showed that social inventories of zinc ingots in China extended their gains over the weekend.

On the LME, the nonferrous complex kicked off European trading hours on Monday with broad losses. Copper, aluminium, zinc, nickel and lead recovered some ground as of 18:52 Beijing time.

OPEC and its oil-producing allies agreed on Saturday to extend the group’s historic production cut by a third month through end-July, which lifted oil prices.

Market sentiment was also supported by growing hopes of an economic recovery from the Covid-19 pandemic, spurred by data from US Labour Department released Friday showing an unexpected increase in US employment in the month of May.

A separate report from China’s General Administration of Customs released Sunday showed that China’s trade surplus surged to a record in May as exports fell less than expected, helped by an increase in medical-related sales, and imports slumped along with commodity prices.

Copper: The most-traded SHFE July contract rose 1.78% on the day to end at 45,800 yuan/mt, after hitting a three-month peak of 45,960 yuan/mt in afternoon trade. Monday’s gains sent the contract further away from the five-60 moving averages. The contract may test the 46,000 mark tonight, if bulls continue to pile into the market.

Customs data showed that China’s imports of copper ore and concentrate slumped 16.7% to 1.69 million mt in May from a month earlier, while imports of unwrought copper and copper products declined 5.51% to 436,000 mt.

Aluminium: The most-liquid SHFE July contract scaled its highest since March 3 at 13,450 yuan/mt in afternoon trade, shortly before closing up 2.01% at 13,420 yuan/mt. Another decline in China social inventories over the weekend encouraged Shanghai bulls to track gains in LME aluminium to buy. Further upside in SHFE aluminium is expected to be limited, however, as spot prices have flipped into discounts in the physical market despite falling inventories.

Customs data showed that China’s exports of unwrought aluminium and aluminium products declined over 13% from a month ago and nearly 29% from a year ago to 382,900 mt in May.

Zinc: The most-active SHFE July contract rose in the daytime session, recouping losses from Friday night when it plumbed its lowest in more than a week at 16,250 yuan/mt, and closed 0.63% lower at 16,505 yuan/mt. Continued rebound in China social inventories amid weakening consumption in a low season weighed on zinc prices, while hopes of an export recovery following global economic re-openings and slow resumption of mines offered support. SHFE zinc is expected to remain rangebound.

Nickel: The most-traded SHFE July contract firmed 0.47% to 103,770 yuan/mt in volatile trading on Monday.

Lead: The most-active SHFE July contract slipped to a one-week trough of 14,270 yuan/mt in afternoon trade, before it recovered some ground to close 0.07% weaker at 14,340 yuan/mt. It is likely to test support at 14,300 tonight as its LME counterpart plunged in early European trading hours.

Tin: The most-active SHFE August contract strengthened 1.91% on the day to 136,980 yuan/mt, after notching the highest since February 27 at 137,410 yuan/mt in afternoon trade. Resistance is seen at the upper Bollinger band at 138,000.