SMM Evening Comments (Jun 22): Shanghai base metals mostly rose on macroeconomic optimism

SHANGHAI, Jun 22 (SMM) – SHFE nonferrous metals, except for nickel and tin, closed higher on Monday June 22, following after they kicked off the week mostly higher. Market sentiment was lifted after China's central bank on Monday pumped cash into the banking system via reverse repos to maintain liquidity.

The People's Bank of China injected a total of 120 billion yuan into the market, including 40 billion yuan through seven-day reverse repos at an interest rate of 2.2% and 80 billion yuan of 14-day contract at an interest rate of 2.35%, according to a statement on the website of the central bank.

China kept its benchmark lending rate unchanged for the second straight month at its June fixing on Monday, with the 1-year loan prime rate left at 3.85%. The 5-year loan prime rate was also kept stable at 4.65%.

Copper extended a rally from early-April and advanced 0.59%. Aluminium gained 1.07%, lead rose for the fifth consecutive day with a rise of 0.76%, zinc edged up 0.03%, while tin slipped 0.32% and nickel lost 1.5%.

The ferrous complex, however, traded mostly lower as iron ore declined 2.21%, rebar shed 0.25%, hot-rolled coil fell 0.41%, coke dipped 0.43%, while stainless steel added 0.8%. 

The operating rates across China’s blast furnace steelmakers inched lower, which will cap any increase in pig iron supply, showed SMM survey. The seasonality impact on end-users demand continues. 

SMM data showed that iron ore stocks across 35 Chinese ports increased 540,000 mt in the week ended June 19 to 99.35 million mt, following a 790,000 mt decline in the previous week.

Copper: The most-traded SHFE August contract halted increase at 47,710 yuan/mt as investors loaded up shorts at that level, sending the contract to a session low of 47,280 yuan/mt before it ended the day 0.59% higher at 47,470 yuan/mt. Lingering concerns about the coronavirus outbreak continued to cap the increase in prices and prevented the contract from breaking up 48,000 yuan/mt. It remains to be seen whether a buildup of longs will lift the contract tonight. 
Chile's Codelco copper miner said on Saturday that it will suspend construction projects in the northern part of the country to stop the spread of the coronavirus. This grew concerns about raw materials supply and somewhat supported copper prices. 

Aluminium: The most-liquid SHFE contract traded robustly as tight supply of spot cargoes grew confidence in longs, lifting the contract to a session high of 13,750 yuan/mt, before the contract ended 1.07% higher on the day at 13,695 yuan/mt. The contract will likely remain strong before the Dragon Boat Festival, hovering between the five- and 10- day moving averages. 

Zinc: The most-active SHFE August contract failed to shrug off pressure from 17,000 yuan/mt, as it slipped to a session low of 16,760 yuan/mt after consolidated around 16,930 yuan/mt for most of the day, ending the day slightly higher at 16,825 yuan/mt. With a rebound in domestic zinc inventories during the weekend and a weakened LME zinc, the contract may test support from the five-day moving average tonight. 

Nickel: The most-traded SHFE August contract faced pressure from loaded-up shorts, falling to an intraday low of 101,670 yuan/mt and ending the day 1.5% lower at 101,860 yuan/mt. Open interest increased 333 lots to 114,890 lots. A relatively easy monetary environment will narrow any downsides in nickel prices. Holiday-thinned trades will likely keep the contract weak tonight. 

Lead: The most-active SHFE August contract surged with a rise in long positions, hitting a session high of 14,645 yuan/mt and ending the day 0.76% higher at 14,560 yuan/mt. Buoyance from longs may expand upward room of the contract tonight. 

Tin: The most-liquid SHFE August contract came off from a session high of 138,880 yuan/mt, closing the day 0.32% lower on the day at 137,010 yuan/mt, with pressure from departing longs. Support below is expected from the 20-day moving average, or 136,000 yuan/mt tonight.