SMM Morning Comments (Jun 16): Shanghai base metals recovered on Tuesday morning, aluminium added over 1%

SHANGHAI, Jun 16 (SMM) – SHFE nonferrous metals traded mostly higher on the morning of Tuesday June 16, recovering losses from overnight amid continued concerns about a second wave of the coronavirus pandemic.

Aluminium climbed as much as 1.54% in early trades this morning. Nickel climbed about 1.5% and copper edged higher. 

US futures climbed after the Federal Reserve again boosted investor sentiment in face of worries over a second wave of the coronavirus.

LME and SHFE base metals ended mixed overnight. LME copper shed 0.7%, tin slipped 1.12%, lead declined 0.54%, while aluminium gained 0.73%, zinc added 0.63% and nickel climbed 0.71%. 

SHFE copper fell 0.28%, tin dipped 0.34%, while aluminium rose 0.62%, zinc increased 0.34%, nickel went up 1.34% and lead went flat. Rebar shed 0.44% and stainless steel dropped 0.51%.

Crude oil prices rose on Monday as signs that demand was recovering while OPEC+ members were complying with a production cut deal outweighed fears that new coronavirus infections could further depress the global economy.

West Texas Intermediate crude rose 2.37%, to settle at $37.12/barrel. Brent crude climbed 2.5% to trade at $39.73/barrel.

Copper: Three-month LME copper gained 0.7% overnight and finished at $5,739/mt, amid optimism of crude oil output cut and signs of recovery for crude demand. Uncertainty about supply of copper ore intensified as Chile´s government said on Monday it would extend a state of catastrophe in place since mid-March by 90 days as cases of coronavirus surged. Today, LME copper is seen trading at $5,740-5,800/mt with the most-active SHFE contract trading at 46,500-47,000 yuan/mt. Spot premiums are likely at 120-150 yuan/mt. 

Aluminium: Three-month LME aluminium regained losses from early session last night, as it rallied from a session low of $1,564.5/mt and closed 0.73% higher on the day at $1,587.5/mt. Open interest added 1,243 lots to 869,000 lots as longs loaded up their positions. The most-liquid SHFE July contract found strong support from fundamentals, ending overnight higher at 13,360 yuan/mt. Trading range is expected at 13,350-13,600 yuan/mt today with LME aluminium at $1,560-1,600/mt. 

Zinc: Three-month LME zinc climbed on higher prices of crude oil, ending up 0.63% on the day at $2,001.5/mt, with support from the 60-day moving average. LME zinc inventories shrank 525 mt, or 0.42% to 124,900 mt. It is expected to trade between $1,960-2,010/mt today. The most-liquid SHFE July contract followed its LME counterpart higher and finished 55 yuan/mt higher on the day at 16,400 yuan/mt. The Bollinger lower band offered support. With the KDJ indicators expanding upwards, and social inventories of domestic zinc extending their declines, the contract will likely trading between 16,200- 16,700 yuan/mt today. Spot premiums of 0# domestic Shuangyan brand are seen at 170-190 yuan/mt today. 

Nickel: Three-month LME nickel tested the five- and 10- day moving averages, rebounding from a session low of $12,470/mt and closing 0.71% higher on the day at $12,830/mt. It is expected to continue to test support from the five- and 10- day moving averages today, with its SHFE counterpart testing resistance from the Bollinger middle band following after it broke up the five-day moving average last night.

Lead: Three-month LME lead consolidated at high levels, trimming some losses after falling to a session low of $1,721.5/mt and ending 0.54% lower on the day at $1,742.5/mt. The most-active SHFE contract hovered above all moving averages, closing flat on the day at 14,135 yuan/mt.

Tin: Three-month LME tin is forecasted to trade with support from $16,500/mt today, with the most-liquid SHFE contract facing pressure from the five-day moving average, or 136,500 yuan/mt today.