SMM Morning Comments (Jun 10): Shanghai base metals opened mostly higher on softened dollar

SHANGHAI, Jun 10 (SMM) – SHFE nonferrous metals opened mostly higher on Wednesday June 10, supported by improved risk sentiment following continued declines in the US dollar. 

Copper extended gains from overnight and climbed more than 1% in early trades this morning. Aluminium advanced about 1%, while nickel and zinc extended losses. 

Overnight, SHFE nonferrous metals mostly finished higher as copper advanced 1.17%, aluminium climbed 0.59%, lead increased 0.49%, tin rose 0.07%, while zinc lost 0.63% and nickel shed 0.73%.

LME base metals declined for the most part on Tuesday, as nickel led the losses with a drop of 1.22%. Aluminium fell 0.12%, zinc slipped 1.13%, lead dipped 0.11%, while copper added 0.87% and tin grew 1.11%. 

Investors have turned their focus to the US Federal Reserve meeting Wednesday, where the central bank will probably shed light on various lending plans without easing further. 

Copper: A reduced US dollar continued to buoy copper prices with three-month LME copper adding 0.87% overnight to end at $5,767/mt and the most-liquid SHFE July contract rising on loaded-up longs and finishing at 46,670 yuan/mt. Optimisms around extended production cuts lifted crude oil prices and this also supported the red metal. Today, LME copper is seen trading at $5,750-5,810/mt today with the most-liquid SHFE contract at 46,600-47,000 yuan/mt. Elevated copper futures may keep spot offers in discounts as wide as 20 yuan/mt today. 

Aluminium: Three-month LME aluminium recovered after declined, but it failed to end higher on the day as it lost 0.12% on the day at $1,603/mt. Open interest increased 1,810 lots to 862,000 lots as shorts loaded up their positions. The most-liquid SHFE July contract climbed steadily overnight and closed at 13625 yuan/mt, with the trading range expected at 13,550-13,850 yuan/mt today. 

Zinc: A steep increase in LME zinc inventories weakened three-month LME zinc, which slipped to a session low of $2,002/mt before it pared some losses and ended at $2,017/mt, down 1.13% on the day. Support remained from the 10- and 20- day moving averages. LME zinc inventories rose a significant 9.07%, or 8,450 mt on Tuesday to 101,575 mt. Deepened spot discounts also weighed on LME zinc. Today, it is expected to trade between $2,000-2,050/mt and support from the 10-day moving average will be monitored. 
The most-active SHFE July contract trimmed declines after it fell to a session low of 16,350 yuan/mt, given support from the 40-day moving average and prospects for near-term lower supply. Trading range today is expected at 16,300-16,800 yuan/mt with spot premiums for 0# domestic Shuangyan brand at 170-190 yuan/mt. 

Nickel: Three-month LME nickel bounced back after fell to the lowest level overnight at $12,720/mt. With support from the 10-day moving average, it closed at $12,910/mt, down 1.22% on the day. Pressure above from the 5-day moving average will be watched today. The most-liquid SHFE contract followed crude oil prices higher overnight after opening at lows of 104,300 yuan/mt, ending 670 yuan/mt lower on the day at 104,030 yuan/mt. The contract is expected to move sideways around the five-day moving average today. 

Tin: Three-month LME tin will likely trade with pressure from $17,100/mt today with the most-active SHFE contract finding support from the five-day moving average, or 136,000 yuan/mt. Domestic spot prices are seen at 138,500-141,500 yuan/mt today.