SMM Morning Comments (Jun 17): Shanghai base metals mostly higher after strong US data

SHANGHAI, Jun 17 (SMM) – SHFE nonferrous metals, except for copper, opened higher on Wednesday, extending a broad rally overnight, as market optimism about the global economic recovery increased following a record rise in the US retail sales. 

Nickel extended its rally from last night and advanced by about 1% in early trades this morning. Tin added as much as 1.49%, lead grew over 1%, while copper traded slightly lower on the day. 

Beijing’s city government on Tuesday raised its coronavirus emergency response level to II from III, according to state media, and this raised concerns about the pandemic. 

Overnight, LME and SHFE base metals mostly closed higher on the day, with LME lead leading the gains with a rise of 1.69%. LME copper edged up 0.05%, aluminium added 1.04%, nickel climbed 1.6%, while zinc slipped 0.02% and tin lost 0.03%. 

SHFE zinc advanced 0.33%, lead rose 0.53%, nickel grew 0.97%, tin increased 1.05%, while copper shed 0.17%. Rebar dropped 0.31% and stainless steel inched down 0.08%.

Crude oil prices rose on Tuesday as the US stocks surged on the upbeat US retail sales data, and the International Energy Agency (IEA) increased its oil demand forecast for 2020. The gains in oil prices, however, were capped by worries about a second wave of coronavirus cases. 

Copper: Three-month LME copper added 0.05% on the day to finish Tuesday at $5,742/mt with its SHFE counterpart closing lower on the day at 46,690 yuan/mt. The gradual recovery of the overseas economies and stimulus policies from the US, Japan and European countries grew investors optimism about demand. Steady decline in domestic inventories amid stepping-up construction in the infrastructure and housing markets also support fundamentals and may keep copper prices at high levels in the near term. Today, LME copper is seen trading at $5,710-5,770/mt with the most-active SHFE copper at 46,300-46,700 yuan/mt. Spot premiums are likely at 160-200 yuan/mt. 

Aluminium: Three-month LME aluminium gained for the second straight session, ending up 1.04% on the day at $1,604/mt, following a session low of $1,604/mt. The most-active SHFE July contract climbed amid departing shorts, trading higher along with the five-day moving average and closed the day higher at 13,875 yuan/mt. Fundamentals will likely support the contract at 13,850-14,100 yuan/mt today. 

Zinc: Three-month LME zinc traded weakly overnight as concerns about a second wave of the coronavirus outbreak depressed investors sentiment. LME zinc tested support from $2,000/mt and finished the day 0.02% lower at $2,001/mt, with zinc inventories across LME-approved warehouses falling 125 mt to 124,775 mt. With support from the 40-day moving average, LME zinc is expected to hover between $1980-2030/mt today. 
The most-liquid SHFE August contract declined on a weakened LME zinc to hit a session low of 16,380 yuan/mt, before departing shorts sent it higher to end at 16,400 yuan/mt, up 0.28% on the day. Without significant support from fundamentals, the contract may trade between 16200- 16700 yuan/mt today with spot premiums for 0# domestic Shuangyan zinc at 170-180 yuan/mt. 

Nickel: Three-month LME nickel climbed to hit a session high of $13,010/mt and trimmed some gains to close at $13,035/mt, up 1.6% on the day. Indonesia’s earthquake on June 16 caused a breakdown of power plants at the Morowali industrial park. This, coupled with optimism prospects for macroeconomic development, supported nickel prices. 
The most-active SHFE August contract found support from 102,400 yuan/mt and recovered to close at 103,300 yuan/mt. The K-indicator stayed above all moving averages. Today, the contract will likely test resistance from 104,000 yuan/mt with the most-active SHFE contract hovering around $13,000/mt today. 

Lead: Three-month LME lead gave up gains after it rose to a session high of $1,788/mt, closing 1.69% higher on the day at $1,772/mt. The most-traded SHFE contract gained 0.53% overnight to end at 14,235 yuan/mt, as it bounced back from a low of 14,215 yuan/mt. Domestic consumption of lead remained weak. The price spread between the spot primary and secondary lead continue to narrow with the decline in prices. 

Tin: Trading between the five- and 10- day moving averages, three-month LME tin is estimated to find support from $16,500/mt in the near term, with the most-active SHFE contract trading with support from the 10-day moving average, or 136,500 yuan/mt.