SMM Morning Comments (Jun 22): Shanghai base metals mostly extended increases on Monday morning

SHANGHAI, Jun 22 (SMM) – SHFE nonferrous metals, except for nickel, kicked off the week higher, extending a broad increase last week. Fears of a resurgence of coronavirus infections, however, limited the gains. 

Stocks in Asia traded mixed on Monday morning as investors mulled the impact of coronavirus outbreaks in countries from the US to Australia.

The US reported more than 30,000 new COVID-19 cases on Friday, the highest number of daily cases since May 1, according to Johns Hopkins University data.

LME base metals closed mixed last Friday. Copper recorded the fifth consecutive week of increase, rising 0.14% on Friday. Zinc climbed 1.15%, tin edged up 0.06%, while aluminium shed 0.88%, nickel slipped 1.28%, and lead fell 0.75%.

SHFE nonferrous metals mostly closed higher last Friday night, with zinc leading the gains with a rise of 0.71%. Copper added 0.4%, lead grew 0.38%, tin went up 0.33%, while nickel lost 0.88% and aluminium eased 0.15%.

Crude oil prices finished with a weekly rise of about 10% on Friday, as the sudden drop in US production of crude oil, along with OPEC output cuts, offers hope that the oil glut in the market will reduce.

Copper: Three-month LME copper gave up gains after rising to a session high of $5,899/mt last Friday, finishing the day 0.14% higher at $5,810/mt. The most-active SHFE contract opened at highs around 47,900 yuan/mt, before growing caution around the coronavirus outbreak weighed on the contract to end it at 47,380 yuan/mt, up 0.4% on the day. The continued pandemic crisis in South America added to uncertainties about copper raw materials supply. This, coupled with better-than-expected consumption and continued downtrend in domestic copper inventories, underpinned the red metal. 

Today, the SHFE contract is expected to trade between 47,200-47,600 yuan/mt, with LME copper at $5,800-5,870/mt. Spot premiums will likely stay at high levels of 170-200 yuan/mt as demand picks up on stabilised prices. 

Aluminium: Three-month LME aluminium finished lower at $1,586/mt last Friday as it came off after climbed to a session high of $1,605.5/mt, with investors covering their bullish positions. Open interest lost 2,775 lots to 831,000 lots. Amid weakness in fundamentals, the most-traded SHFE August contract declined to test the 10-day moving average and ended last Friday night at 13,550 yuan/mt. It is expected to hover between 13,450-13,850 yuan/mt today. 

Zinc: Three-month LME zinc increased for the third consecutive day as it broke up pressure from the Bollinger upper band with buoyance from longs, closing the day 1.15% higher at $2,070/mt. Zinc inventories across LME-approved warehouses shrank 0.2%, or 250 mt on Friday, to 124,050 mt. Trading range today is expected at $2,040-2,090/mt today. 
The most-active SHFE August contract traded higher following a strengthened LME zinc, climbing to a session high of 17,015 yuan/mt and trimming some gains to end at 16,940 yuan/mt, up 120 yuan/mt on the day. It has expanded upwards above all moving averages on hopes of economic recovery from domestic stimulus policies. Inflow of imported zinc will be watched in the short term. Today, the contract may trade between 16,700-17,200 yuan/mt with premiums of 0# domestic Shuangyan brand at 110-130 yuan/mt. 

Nickel: Three-month LME nickel weakened after rising to a session high of $13,020/mt, ending the day 1.28% lower at $12,760/mt, with open interest up 2,167 lots to 204,000 lots. With support from the 10-day moving average, it opened at $12,765/mt today and whether optimistic sentiment around macroeconomy will lift prices will be monitored today. 
The most-active SHFE August contract traded lower last Friday night as loaded-up shorts weighed it down before it found support from the 40-day moving average, ending 1,700 yuan/mt lower on the day at 102,500 yuan/mt. Support from 102,500 yuan/mt will be watched today. 

Lead: Three-month LME lead lost 0.75% last Friday to finish at $1,781.5/mt, following a session high of $1,801/mt. It remained in an overall upward trend and support from moving averages below will be monitored. The most-liquid SHFE contract advanced for the fourth straight day, hitting a high of 14,625 yuan/mt and ending the day 0.38% higher at 14,585 yuan/mt. 

Tin: Three-month LME tin is estimated to trade with support from the 20-day moving average, or $16,300/mt today, after it regained earlier losses last Friday and closed slightly higher on the day at $16,885/mt. The most-traded SHFE August contract is expected to find support from the 20-day moving average, or 136,000 yuan/mt today, with resistance above from 139,500 yuan/mt.