SMM Evening Comments (Jun 19): SHFE base metals mostly rose to end the week higher

SHANGHAI, Jun 19 (SMM) – SHFE nonferrous metals, except for tin, rose on Friday, ending the week with solid gains, as the top consumer China signalled plans to maintain liquidity in the financial system for the rest of the year, raising hopes of improved demand for metals.

Copper surged nearly 2% on the day to lead the way up, zinc rose 1.7%, lead climbed 1.1%, nickel advanced 0.9% and aluminium gained 0.4%, while tin shed 0.5%.

For the week, the six metals all ended in positive territory, bolstered by the return of monetary and fiscal stimulus into the spotlight, hopes for economic recovery and COVID-19 treatment. US economic data released this week, on the other hand, reinforced a growing belief that the worst may be over for the world’s largest economy.

Concerns surrounding geopolitical flare-ups between countries in Asia and recent upticks in coronavirus cases in various countries, however, kept markets on edge.

Market sentiment on Friday was underpinned after a Chinese Centers for Disease Control and Prevention expert said Thursday that a coronavirus outbreak in Beijing was under control.

Copper: The most traded contract for August delivery on the SHFE jumped 1.97% to end at a new high since January 23 at 47,680 yuan/mt. It rose 1.97% on the week, marking a fifth straight weekly gain, and it has risen for 11 weeks in the past 13.

SMM data showed that copper inventories across Shanghai, Guangdong and Jiangsu fell for the 14th consecutive week this week. Tight supply offered support to copper prices. The SHFE August contract is likely to test 48,000 mark.

Aluminium: The entry of longs and departure of shorts lifted the most liquid SHFE contract for August delivery during the daytime trading session, which erased overnight losses to end 0.37% higher at a session-high of 13,620 yuan/mt. It rose 1.68% on the week, marking a second straight week of gains, and it has climbed for eight weeks in the past 10. Falling inventories and macro euphoria are likely to prevent SHFE aluminium from pulling back.

Zinc: The most active contract on the SHFE for August delivery extended overnight gains to its highest since February 24 at 16,965 yuan/mt, shortly before it closed 1.71% higher at 16,935 yuan/mt. It posted a week gain of 3.39%. It is likely to follow its LME counterpart higher and stand above the 17,000 mark tonight, given macro optimism and slow resumption of mines from the pandemic.

Nickel: As longs aggressively loaded up positions, the most traded SHFE contract for August delivery crept up to its highest in more than a week at 104,560 yuan/mt, shortly before it finished the day 0.91% higher at 104,200 yuan/mt. It posted a weekly gain of 2.42%, the fourth increase over the past five weeks. Despite headwinds on fundamentals, SHFE nickel is likely to remain firm amid positive market sentiment.

Lead: The contract for August delivery has become the most active lead contract on the SHFE. It rose 1.12% to end at 14,500 yuan/mt, after hitting its highest since March 10 at 14,535 yuan/mt earlier in the session as longs added positions. Upside potential in SHFE lead is likely to be limited by weak fundamentals. It gained 2.73% on the week, and it has risen for six weeks in the past seven.

Tin: The most active SHFE August contract extended overnight losses to a session-low of 136,580 yuan/mt, before it recouped some losses to close 0.48% weaker at 137,410 yuan/mt. It ended the week with a moderate gain of 0.27%, marking the fifth consecutive weekly gain. Support is seen at the 20-day moving average at 135,500 yuan/mt.