SMM Morning Comments (Jun 24): Shanghai base metals mostly lower on Wednesday morning

SHANGHAI, Jun 24 (SMM) – SHFE nonferrous metals traded mostly lower on Wednesday morning, extending a broad decline overnight, as investors weighed better-than-expected economic data against the continued rises in new coronavirus cases in certain areas across the globe.

Zinc extended losses and fell about 1%, while copper recovered from declines overnight and traded slightly higher in early trades this morning. 

LME and SHFE base metals ended mostly lower overnight, with LME zinc leading the losses with a drop of 2.23%. LME aluminium slipped 0.59%, tin fell 0.35%, lead lost 1.55%, while copper advanced 0.27% and nickel added 0.52%. 

SHFE zinc declined 1.39%, aluminium shed 0.4%, lead fell 0.45%, nickel eased 0.4%, while copper continued to edge up by 0.19% and tin climbed 0.38%. Rebar inched down 0.06% and stainless steel shed 1.36%.

Crude oil prices climbed on Tuesday in a volatile session after US President Donald Trump soothed market nerves over the status of the US-China trade deal.

Copper: Prices of copper hovered at high levels last night, with three-month LME copper adding 0.27% on the day to finish at $5,911/mt and the most-liquid SHFE contract edging lower to end at 47,730 yuan/mt. Overseas manufacturing sector data came in better than expected for June, reinforcing market optimism that the global economy is on steady recovery. A softened US dollar also supported the red metal, even as concerns about the continuous increases in new coronavirus cases limited the gains. Today, the SHFE contract may trade between 47,600-48,000 yuan/mt with LME copper at $5,870-5,930/mt. Spot premiums may edge lower to 150-170 yuan/mt as pre-holiday purchases were not as strong as expected. 

Aluminium: Three-month LME aluminium consolidated weakly around the five and 10- day moving averages on Tuesday, falling to an intraday low of $1,590.5/mt near closing and paring some losses to end 0.59% lower on the day. The most-traded SHFE August contract pulled back from a high of 13,755 yuan/mt overnight, closing lower on the day at 13,620 yuan/mt, as risk aversion sentiment pre-holiday prompted investors to cover positions. The contract is seen trading at 13540-13660 yuan/mt today. 

Zinc: Three-month LME zinc relinquished gains from the previous day, as loaded-up shorts sent it to a session low of $2,034/mt, before it trimmed some losses to finish at $2,037.5/mt, down 2.23% on the day. US-China trade deal confusion grew investors risk aversion, which weighed on the metal, but support remained from the 10-day moving average. LME zinc inventories further shrank on Tuesday, falling 0.12%, or 150 mt to stand at 123,450 mt. Trading range is seen between $2,010-2,060/mt today.

The most-active SHFE August contract followed its LME counterpart lower, falling to a session low of 16,655 yuan/mt and ending lower for the third consecutive day, at 16,675 yuan/mt, down 1.39% on the day. An absence of a significant pickup in overseas demand may cap any upsides in zinc prices. Today, the contract may trade between 16,400-16,900 yuan/mt with premiums of 0# domestic Shuangyan zinc at 80-90 yuan/mt. 

Nickel: Three-month LME nickel bounced back after slipping to a session low of $12,525/mt, closing the day 0.52% higher at $12,685/mt, given support from the 40-day moving average. It opened at $12710/mt today and pressure above from the five- and 20- day moving average will be monitored. 
The most-active SHFE contract hovered in a narrow band around 101,700 yuan/mt, ending slightly lower on the day at 101,500 yuan/mt. Trading range today is expected at 101,000-102,000 yuan/mt for the SHFE contract and at $12,500-12,750/mt for LME nickel. SMM expects the purchases from most stainless steel makers to remain supportive of domestic nickel prices on the backdrop of overall supply glut for nickel. 

Lead: Three-month LME lead fell amid a broad decline in base metals, retreating from a session high of $1778/mt to hit a low of $1745/mt, ending the day 1.55% lower at $1,747/mt. The decline may mark a halt of its previous round of rebound. 
Last night, the most-liquid SHFE contract stemmed decline at 14,390 yuan/mt, finishing 0.45% lower on the day at 14,435 yuan/mt. 

Tin: Three-month LME tin is estimated to trade with pressure above from $17,300/mt today with support below from the 20-day moving average, or $16,500/mt. The most-active SHFE contract, meanwhile, will face resistance from 139,500 yuan/mt with support from the five-day moving average.  
China’s Yunnan Tin has announced to put its equipment into maintenance for no longer than 28 days, starting from June 24. The regular overhaul is seen causing little impact on domestic tin supply fundamental.