SMM Morning Comments (Jun 18): Shanghai base metals mostly extended rises from overnight

SHANGHAI, Jun 18 (SMM) – SHFE nonferrous metals, except for aluminium and nickel, traded higher across the board on the morning of Thursday June 18, following a broad increase overnight.

Copper moved sideways and gained about 0.2% in early trades this morning. Lead and zinc advanced close to 1%, while aluminium shed as much as 1.04% and nickel edged lower. 

Overnight, LME and SHFE base metals extended their increases for the most part, with LME zinc leading the gains with a rise of 1.05%. Copper grew 0.96%, aluminium added 0.22%, tin climbed 0.53%, lead gained 1.02%, while nickel slipped 1.57%.

SHFE copper advanced 0.45%, zinc went up 0.97%, lead rose 0.77%, tin edged up 0.01%, while nickel shed 0.32% and aluminium eased 0.65%. Rebar climbed 0.42% while stainless steel decreased 0.2%.

Crude oil prices fell slightly Wednesday amid rising US crude stockpiles as well as renewed coronavirus fears. 

Copper: Three-month LME copper rallied and hit a session high of $5,797/mt last night, before it closed the day 0.96% higher at $5,797/mt. The most-liquid SHFE July contract climbed on departing shorts, ending at 46,990 yuan/mt, following a high of 47,020 yuan/mt. A surge in coronavirus cases in some US states sparked risk aversion sentiment, which lifted the US dollar while weighed on crude oil prices. These are expected to keep copper prices under downward pressure today. But overall optimism about the global economic recovery with stimulus policies will support prices of the red metal in the short run.

Today, trading range is expected at $5,720-5,780/mt for LME copper and at 46,700-47,000 yuan/mt for the SHFE contract. Spot premiums are seen at highs of 170-200 yuan/mt. 

Aluminium: Three-month LME aluminium ended higher for the third consecutive day, as it bounced back after dipping to a session low of $1,591/mt, finishing the day 0.22% higher at $1,607.5/mt. Open interest shrank 15,022 lots to 838,000 lots as shorts covered their positions. 
The most-traded SHFE July contract moved lower last night, and is expected to trade between 13,700-13,900 yuan/mt today. Spot premiums are seen at 180-200 yuan/mt. Transactions in the spot market, change in social inventories of primary aluminium and its impact on market sentiment will be closely monitored. 

Zinc: Three-month LME zinc expanded on Wednesday but high inventories and widened spot discounts capped the upsides of prices. LME zinc halted increase at $2,035.5/mt and trimmed gains to close 1.05% higher on the day at $2,022/mt. Zinc inventories across LME-approved warehouses fell 275 mt, or 0.22%, on Wednesday to 124,500 mt. Today, trading range of LME zinc is seen at $1,990-2,040/mt. 
The most-liquid SHFE August contract rose above the Bollinger upper band to hit a session high of 16,795 yuan/mt, before it gave up some gains and closed the day higher at 16,650 yuan/mt. Concerns about demand in a slow season and a second wave of the coronavirus outbreak limited the rise in zinc prices. The SHFE contract will likely hover between 16,300-16,800 yuan/mt today with spot premiums of 0# domestic Shuangyan zinc at 140-160 yuan/mt. 

Nickel: Three-month LME nickel declined on a strengthened US dollar, falling from a session high of $13,045/mt and finished 1.57% lower on the day at $12,830/mt. With support from the five-day moving average, it opened at $12,840/mt today and support from $12,700/mt will be monitored. 
The most-active SHFE August contract followed its LME counterpart lower as it broke down the daily moving average and 103,200 yuan/mt, ending the day 560 yuan/mt lower at 102,920 yuan/mt. The five-day moving average continued to expand upwards and stood above all moving averages. Today, support from the 10- and 40- day moving averages will be watched. 
Indonesia’s revised mining law took effect on June 17, which allowed miners building smelters to export ore for the next three years. But the revisions stipulated that the government can rule against the export of specific ores under a separate regulation. 

Lead: Three-month LME lead climbed on a board rally in base metals, rising to a session high of $1,796/mt and finished the day 1.02% higher at $1,790/mt. The most-liquid SHFE contract followed its LME counterpart higher and ended higher for the third straight day, at 14,415 yuan/mt, above all moving averages. It may face significant pressure above. 

Tin: Three-month LME tin is estimated to trade with pressure from $17,300/mt today with the most-active SHFE August contract facing resistance from 139,500 yuan/mt and support from the five-day moving average, or 137,000 yuan/mt today.