SMM Morning Comments (Jun 11): Shanghai base metals traded mixed following Fed decision 

SHANGHAI, Jun 11 (SMM) – SHFE nonferrous metals traded on a mixed note on Thursday morning, following a broad rally overnight, as market participants digested the Federal Reserve’s latest monetary policy decision and outlook for the economy over the coming years.

The Fed left interest rates unchanged Wednesday and committed to maintaining its unprecedented stimulus plan.

Copper extended its rally and advanced close to 2% in early trades this morning. Zinc jumped as much as 2.59%, while lead, tin and nickel edged lower. 

Overnight, LME and SHFE base metals closed higher for the most part. LME copper led the gains with a rise of 2.38%. Tin climbed 1.83%, nickel added 0.77%, aluminium rose 1.5%, zinc went up 0.59%, while lead shed 0.97%.

SHFE copper rallied 1.8%, aluminium grew 1.1%, zinc increased 0.79%, nickel climbed 0.19%, tin expanded 0.32%, while lead eased 0.42%. Stainless steel rose 0.12% while rebar slipped 0.39%.

Crude oil prices accelerated their declines on Wednesday and closed lower after the Energy Information Administration (EIA) reported a rise in US crude oil inventories of 5.72 million barrels for the week ended June 5. 

Copper: Three-month LME copper traded robustly and broke up $5,800/mt and $5,900/mt on Wednesday, ending up 2.38% on the day at $5,904/mt. The most-liquid SHFE July contract also climbed on investors improved risk sentiment, closing higher at 46,830 yuan/mt. Trading range today is seen at $5,870-5,930/mt and 47,300-47,600 yuan/mt, respectively. Spot discounts in the domestic market are expected to widen further today to as much as 40 yuan/mt as copper futures continue to rally. 

Aluminium: Three-month LME aluminium recovered its declines from March as it climbed on a softened US dollar, hitting a session high of $1,640/mt and ending higher on the day at $1,627/mt. It is expected to trade between $1,600-1,650/mt today with the most-active SHFE contract at 13,400-14,000 yuan/mt. 

Zinc: Three-month LME zinc regained losses from Tuesday even as LME zinc inventories continued to build Wednesday. Support from longs lifted LME zinc to a session high of $2,035.5/mt, before it finished 0.59% higher on the day at $2,029/mt. Zinc inventories across LME-approved warehouses added 11450 mt, or 11.27% on Wednesday to 113,025 mt. With hopes of global economic recovery from the coronavirus crisis, LME zinc may find some support from fundamentals in the medium term but elevated inventories may cap its upsides, keeping prices between $2,000-2,050/mt today. 
The most-traded SHFE July contract increased on loaded-up longs and departing shorts, ending higher on the day at 16,570 yuan/mt. Subdued trades in the spot market limited the rally in zinc prices. Trading range today is expected at 16,300-16,800 yuan/mt today with Spot premiums for 0# domestic Shuangyan brand at 170-180 yuan/mt. 

Nickel: Three-month LME nickel recovered losses from early trades during the European trading hours, rising to a session high of $13,065/mt but pressure from $13,000/mt settled it at $13,010/mt, up 0.77% on the day. With support from the 10-day moving average, LME nickel may trade sideways around $13,000/mt today. 
The most-active SHFE August contract faced resistance from the five-day moving average after it opened at highs at 103,860 yuan/mt. It found support from the 10-day moving average and finished overnight at 103,690 yuan/mt, up 0.51% on the day. The contract will likely consolidate around 104,000 yuan/mt today. 

Lead: Three-month LME lead declined for the third consecutive session on Wednesday while other base metals rose across the board. A broad rally in base metals lifted LME lead from a session low of $1,736.5/mt, before it settled at $1,773/mt, down 0.97% on the day. The most-liquid SHFE contract also weakened on weak fundamentals, falling 0.42% on the day to end at 14,335 yuan/mt. Prices are expected to face continued downward pressure in the near term. 

Tin: After the overnight rally, three-month LME tin is expected to trade with pressure from $17500/mt today with the most-active SHFE contract facing resistance from 140,000 yuan/mt with support from 137,000 yuan/mt today.