SMM Morning Comments (Jun 23): Shanghai base metals retreated as investors weigh prospects of economic recovery

SHANGHAI, Jun 23 (SMM) – SHFE nonferrous metals mostly pulled back on the morning of Tuesday June 23, giving up gains from overnight, as investors weighed optimism over a quick recovery of the global economy from the coronavirus shutdown.

Nickel extended losses with a decline of over 1% in early trades this morning. Copper, lead and tin traded moderately lower, while aluminium remained slightly higher on the day. 

Overnight, LME and SHFE base metals closed mostly higher. LME copper led the gains with a rise of 1.46%, lifted by reduced LME inventories and robust demand from the world’s largest consumer China. Copper inventories across LME-approved warehouses came in at 233,400 mt, down more than 15% from May 13. 

LME aluminium added 0.95%, zinc increased 0.68%, tin added 0.18%, while nickel slipped 0.86% and lead lost 0.39%.

SHFE copper advanced 0.44%, aluminium increased 0.96%, zinc expanded 0.68%, tin climbed 0.31%, while lead dropped 0.41% and nickel dipped 0.93%. Rebar continued to decline by 0.72%, with stainless steel easing 0.15%.

Crude oil prices closed higher Monday on the back of improvement in the longer-term demand outlook as coronavirus lockdowns continued to ease. A rise in the global coronavirus cases, however, limited the gains. 

Copper: Three-month LME copper extended its increase on Monday, rising to as high as $5,900.5/mt and ending the day 1.46% higher at $5,895/mt. The most-active SHFE contract followed its LME counterpart higher, finishing the day at 47,750 yuan/mt. Bullish prospects about the global economic revival after the coronavirus crisis bolstered investors risk appetite and supported the red metal. Today, trading range is expected at $5,850-5,920/mt for LME copper and at 47,900-48,300 yuan/mt for the SHFE contract. Spot premiums are seen at 170-200 yuan/mt, underpinned by relatively tight supply even as elevated copper futures sideline consumers. 

Aluminium: On the back of a softened US dollar, three-month LME aluminium rebounded after initially falling to a session low of $1,581.5/mt, ending up 0.95% on the day at $1,601/mt. The most-active SHFE August contract jumped to a session high of 13,750 yuan/mt as investors covered their shorts, ending the day higher at 13,730 yuan/mt. The contract may hover between 13,640-13,850 yuan/mt today. 

Zinc: Three-month LME zinc gained for the fourth consecutive session, as it climbed to a session high of $2,093/mt following a rally in crude oil prices, closing the day 0.68% higher at $2,084/mt. LME zinc inventories shrank 450 mt, or 0.36% on Monday to 123,600 mt. Overseas countries started to relax lockdown measures and this added to bullish prospects for demand recovery. Today, LME zinc is seen trading at $2,050-2,100/mt. 

The most-active SHFE August contract traded robustly with a rise in longs, closing the day up 115 yuan/mt at 17,025 yuan/mt. The five-day moving average provided support. The upsides in the contract, however, will be capped given expectations of mining operation recovery and current weak trades in the spot market. Trading range is expected at 16,700-17,200 yuan/mt today with premiums of 0# domestic Shuangyan brand at 80-100 yuan/mt. 

Nickel: Three-month LME nickel failed to regain losses overnight, as pressure from the five- and 10- day moving averages kept it below $12,700/mt and settled it 0.86% lower on the day at $12,620/mt. Pressure above from $12,740/mt will be monitored today. 
The most-liquid SHFE August contract lost support from 102,000 yuan/mt, ending 60 yuan/mt lower on the day at 101,800 yuan/mt. The K-indicator was below several moving averages. Today, pressure above is seen from 102,000 yuan/mt. 

Lead: Three-month LME lead retreated from an intraday high of $1,789/mt, falling to a low of $1,764/mt and ending the day 0.39% lower at $1,774.5/mt. The most-liquid SHFE contract also moved lower and finished at 14,485 yuan/mt. Prospects for inventory buildup amid sufficient supply may continue to weigh on lead prices in the near term. 

Tin: Three-month LME tin bounced back from a session low of $16,870/mt, closing up $30/mt on the day at $16,915/mt, regaining losses from the previous two days. Pressure above is estimated at $17,300/mt with support below at $13,650/mt. The most-traded SHFE August contract ended at the highest level overnight of 138,220 yuan/mt after departing shorts lifted it from a session low of 136,750 yuan/mt. The contract will likely face pressure above from 139,500 yuan/mt today.