SMM Evening Comments (Jun 12): SHFE base metals closed broadly lower as Wall Street suffered worst day since March

SHANGHAI, Jun 12 (SMM) – SHFE nonferrous metals rose across the board on Friday, but failed to completely recover from the collapse overnight when growing doubts over a quick recovery from the coronavirus pandemic unnerved investors and sent equity prices plunging.

Base metals on the SHFE closed broadly lower, with nickel shedding 1.4% to lead the way down. Lead fell 1.2%, copper declined 0.8%, tin slipped 0.7%, zinc sank 0.6% and aluminium lost 0.4%.

For the week, copper and tin posted their fourth straight weekly gains, up 3.6% and 1.7% respectively, while aluminium rose 3.4%. Zinc, nickel and lead, meanwhile, registered their first weekly declines in at least three weeks, down 1.1%, 2% and 1.7%, respectively.

On the LME, base metals, except for aluminium, were higher as of 18:46 Beijing time on Friday, recouping losses from sharp declines in the previous session, as US stock futures bounced after the Dow, S&P 500 and Nasdaq on Thursday all recorded their biggest one-day losses since mid-March, posting losses of at least 5.3%.

Copper: The most-traded SHFE contract rose from a session-low of 46,070 yuan/mt to end at 46,840. It shed 0.8% on the day, taking a breather from its recent rally, but was up 3.58% on the week, marking the biggest percentage weekly gain in nine. Further upward momentum is seen in SHFE copper, as SMM data showed another decline in social inventories of copper cathode in China this week. Upbeat China auto sales data for May, meanwhile, boosts optimism about domestic consumption.

Aluminium: The most-liquid SHFE contract rebounded from a session-low of 13,450 yuan/mt to end at 13,625, down 0.37% on the day. It rose 3.38% on the week, marking the fourth gain in the past five weeks. The contract is expected to oscillate between 13,350-13,800 tonight, with downside limited ahead of the expiry of the June contract.

Zinc: The most-active SHFE contract finished the day 0.63% lower at 16,455 yuan/mt, after plumbing a two-week trough of 16,215, below the 40-day moving average, earlier in the session. It lost 1.11% on the week, after two consecutive weeks of gains. SHFE zinc is expected to remain rangebound between moving averages given an array of cross currents with reduced inventories, external demand recovery and near-term ore supply tightness on the bullish side and a low season in China and resumptions of mines on the bearish side.

Nickel: The most-traded SHFE contract climbed off lows in nearly two weeks, but met resistance at the 20-day moving average. It closed down 1.44% on the day to 101,740 yuan/mt, registering a weekly loss of 1.98% and snapping a three-week winning streak. SHFE nickel is unlikely to stage a substantial recovery with little support from fundamentals in China, as pure nickel inventories have risen for three consecutive weeks, NPI prices fell on thinner profits at steel mills and stainless steel prices eased in a supply glut.

Lead: Longs lifted the most-active SHFE contract to close 1.15% lower at 14,145 yuan/mt, after the contract touched a three-week low of 14,035 earlier in the session. It dropped 1.67% on the week, the first decline in six weeks. With support at 14,000, it is likely to hover around 14,145 tonight.

Tin: The most-active SHFE contract climbed to end down 0.67% at 137,040 yuan/mt, after the withdrawal of longs sent the contract to a one-week low of 135,400 earlier in the session. It gained 1.74% on the week, standing above the 10-day moving average, while pressure is seen at 139,000.