SMM Morning Comments (Jun 19): Shanghai base metals mixed on Friday morning amid coronavirus woes

SHANGHAI, Jun 19 (SMM) – SHFE nonferrous metals traded on a mixed note on the morning of Friday June 19, following after they closed mostly higher last night, as traders grappled with disappointing US unemployment data and a potential second wave of the coronavirus pandemic. 

Copper continued to move higher and added about 0.6% in early trades this morning. Nickel failed to hold onto gains from overnight, inching down slightly. Lead and zinc traded marginally higher, while aluminium and zinc eased about 0.5%. 

Overnight, LME and SHFE base metals closed higher for the most part, with LME zinc led the increases with a rise of 1.21%. Copper edged up 0.09%, nickel climbed 0.51%, lead rose 0.28%, while aluminium fell 0.47% and tin slipped 0.27%.

SHFE copper increased 0.6%, zinc added 1.2%, lead expanded 0.38%, nickel advanced 0.21%, while aluminium shed 0.65% and tin dipped 0.29%. Rebar went up 0.39% and stainless steel gained 2.94%.

Crude oil prices regained losses and rose slightly Thursday as a panel of OPEC and its allies met to review record oil supply cuts, even as the market remained concerned about an increase in coronavirus cases reported in Beijing and several states of the US. 

Copper: Three-month LME copper recovered after slipped on Thursday, as it returned back to above $5,800/mt and closed 0.09% higher on the day at $5,802/mt. A strengthened LME copper lifted its SHFE counterpart, which ended at 47,180 yuan/mt with investors covering their shorts. Growing caution in the market kept copper prices rangebound and trading ranges are expected at $5,760-5,840/mt for LME copper and at 46,800-47,200 yuan/mt for SHFE copper. Spot premiums are likely at highs of 190-210 yuan/mt given limited availability after traders’ stockpiling. 

Aluminium: Three-month LME aluminium tested support from the 10-day moving average as it fell from a session high of $1,615.5/mt, ending the day 0.47% lower at $1,600/mt. The most-liquid SHFE August contract continued to pull back last night, dipping below 13,500 yuan/mt to a low of 13480 yuan/mt and finished lower at 13,505 yuan/mt. Slower declines in domestic social inventories reinforced concerns about a slowdown in demand. Today, the contract may trade at 13,400-13,800 yuan/mt with LME aluminium at $1,580-1,610/mt. 

Zinc: Three-month LME zinc gained for the second straight day, rising to a session high of $2,055/mt as optimistic sentiment continued to sustain longs. It closed 1.21% higher on the day at $2,046.5/mt, facing pressure above from the Bollinger upper band. Zinc inventories across LME-approved warehouses shrank 200 mt, or 0.16%, to 124,300 mt. Trading range is expected at $2,000-2,050/mt today. 

Loaded-up longs sent the most-active SHFE August contract to a session high of 16,880 yuan/mt, before the contract ended 190 yuan/mt higher on the day at 16,840 yuan/mt. Open interest added 6,572 lots to 84,721 lots. On the downstream front, producers of galvanised structural parts faced losses on lower prices of finished products, and this may cap the upsides in zinc futures. Today, the contract will likely trade between 16,400-16,900 yuan/mt with spot premiums at 140-150 yuan/mt. 

Nickel: Three-month LME nickel advanced on a rally in crude oil prices, hitting a session high of $12,950/mt and trimming some gains to end at $12,895/mt, up 0.51% on the day. The most-active SHFE contract came off after climbed to a high of 103,700 yuan/mt, finishing the day 230 yuan/mt higher at 103,480 yuan/mt. It is expected to consolidate above the five-day moving average today, with LME nickel trading below $13,000/mt. 
There are market talks saying that Indonesia may relax exports of nickel minerals and investors remain cautious about the fluctuation in nickel prices. 

Lead: Three-month LME lead increased for the third consecutive session with an intraday high of $1,815/mt, ending up 0.28% on the day at $1,795/mt. It has basically recovered the losses triggered by the coronavirus outbreak. But weak fundamentals may see prices pulling back after the recent rally.
The most-active SHFE contract traded higher with its LME counterpart and finished higher on the day at 14,480 yuan/mt, following a session high of 14,540 yuan/mt. 

Tin: Three-month LME tin is estimated to face pressure from $17,300/mt, or the five-day moving average today, after it lost $45/mt on Thursday to finish at $16,875/mt. The most-active SHFE contract moved lower with its LME counterpart, ending 820 yuan/mt lower on the day at 137,670 yuan/mt. Support below is seen from 135,800 yuan/mt, or the 20-day moving average.