SMM Morning Comments (Jun 15): Shanghai base metals opened Monday lower on coronavirus concerns

SHANGHAI, Jun 15 (SMM) – SHFE nonferrous metals opened lower across the board on Monday June 15 as risk aversion intensified amid fears of a second wave of the coronavirus with new cases trending higher in the US and flaring up in Beijing and Tokyo.

Copper and aluminium, however, regained losses after opened at low levels, trading slightly higher on the day as of 10:00 CST.  

US stock futures fell sharply during premarket trading Sunday night, indicating that Wall Street may be headed for another rocky week.

LME and SHFE base metals closed Friday higher for the most part, recovering losses from the previous session. LME lead led the gains and climbed 0.86%. LME copper grew 0.46%, tin expanded 0.5%, nickel advanced 0.71%, while aluminum shed 1.13% and zinc lost 0.18%.

SHFE copper rose 0.75%, aluminium went up 0.41%, nickel increased 0.34%, lead edged up 0.18%, tin added 0.51%, while zinc slipped 0.18%. Stainless steel gained 0.39% and rebar expanded 0.86%.

Crude oil futures settled at a modest loss on Friday, with US and global benchmark prices suffering their first weekly decline in seven weeks. Investors remained worried about oversupply and a resurgence of coronavirus cases in the US, even as OPEC+ agreed to extend production cuts by another month.

Copper: Three-month LME copper regained earlier losses last Friday as it found support from the daily moving average, bouncing back to a session high of $5,842/mt and ending the day 0.46% higher at $5,779/mt. The most-traded SHFE contract also increased and finished above the daily moving average, at 47,040 yuan/mt. Domestic consumption remained supportive of copper prices as the operating rates of the power, cable and copper tube sectors in May came better than expectations. Today, trading range is expected at $5,720-5,780/mt and 46,300-46,700 yuan/mt, respectively. 

Aluminium: Three-month LME aluminium fell for the second straight day as loaded-up shorts prevented it from exceeding $1,598/mt and sent it to end at $1,576/mt, down 1.13% on the day. Open interest added 7,349 lots to 868,000 lots. The development of bearish positions will be monitored today. 

The most-active SHFE July contract came off after climbed to a session high of 13,690 yuan/mt last Friday night, ending slightly higher on the day at 13,625 yuan/mt. The SHFE June contract will finish its last trading day today. Continued destocking trend of domestic primary aluminium may support the July contract at 13,450-13,900 yuan/mt today. 

Zinc: Three-month LME zinc declined on reemerged concerns about the progress in the recovery of the global economy, after a rebound in crude oil prices lifted prices to a session high of $2,018.5/mt. Pressure remained from the five- and 10- day moving averages. LME zinc inventories expanded for the fourth consecutive day, adding 5,525 mt, or 4.61% on Friday to 125,425 mt, and this also grew worries about the near-term demand. Today, LME zinc will likely test support from the 40-day moving average, trading between $1,970-2,020/mt. 
The most-active SHFE July contract also traded lower last Friday night, closing down 0.18% on the day at 16,345 yuan/mt. The recovery of domestic demand was not strong enough to sustain a rally in zinc prices. The contract is expected to hover at 16,200-16,700 yuan/mt with spot premiums for 0# domestic Shuangyan zinc at 170-190 yuan/mt. 

Nickel: Three-month LME nickel pared increases after it climbed to a session high of $12,825/mt. It closed 0.71% higher on the day at $12,740/mt, with open interest up 1,721 lots to 214,000 lots. Its lowest level last Friday was close to the Bollinger middle band and trading range today is expected around $12,700/mt. The most-active SHFE contract will test support from the 40-day moving average today.

Lead: Three-month LME lead moved higher during the European trading hours, climbing to a session high of $1,770/mt and ended up 0.86% on the day at $1,752/mt. The most-liquid SHFE contract held steady at low levels, closing the day up 0.18% following a session high of 14,235 yuan/mt. Fundamentals remain weak and this may keep prices under continued downward pressure. 

Tin: Three-month LME tin trimmed gains as it edged down from a session high of $17,120/mt, closing the day at $17,025/mt, up $86/mt on the day. It will likely trade with pressure from $17,500/mt today, with the most-active SHFE August contract facing resistance from 139,500 yuan/mt and support from 134,500 yuan/mt.