SMM Morning Comments (Jul 1): Shanghai base metals mixed on Wednesday morning, copper rose to more than 5-month high

Published: Jul 1, 2020 10:00
SHFE nonferrous metals traded on a mixed note in Wednesday morning trade, following after a broad rally Tuesday with positive manufacturing data from China bolstering market sentiment.

SHANGHAI, Jul 1 (SMM) – SHFE nonferrous metals traded on a mixed note in Wednesday morning trade, following after a broad rally Tuesday with positive manufacturing data from China bolstering market sentiment. 


LME and SHFE base metals ended mixed overnight. LME copper extended a rally and led the gains with a rise of 1.17%, amid investors worries about supply disruption from major miners caused by the pandemic. Aluminium grew 0.31%, nickel added 0.27%, while tin slipped 0.24%, zinc lost 0.88% and lead shed 1.06%.


SHFE copper advanced 0.76%, aluminium gained 0.72%, lead rose 0.65%, tin increased 0.12%, while zinc dropped 0.6% and nickel eased 0.84%.


A Caixin/Markit survey released on Wednesday showed China’s manufacturing activity expanded and beat expectations in June, with the Caixin/Markit manufacturing purchasing manager’s Index coming in at 51.2, up from 50.7 in May. 


Data released on Tuesday showed the official PMI for China’s manufacturing sector also ticked up, to 50.9 in June from 50.6 in May.


The US Federal Reserve Chairman Jerome Powell on Tuesday expressed worry that a resurgence of coronavirus cases could undermine confidence in the economic recovery. 


Meanwhile, he also committed to keeping interest rates low and providing its various liquidity facilities to ensure financial markets are operating properly.


Copper: Prices of copper continued to rise last night amid optimism outlook for demand resumption, with three-month LME copper stabilising above $6,000/mt to end 1.17% higher on the day at $6,039/mt and the most-active SHFE contract closing up 0.77% on the day at 48,930 yuan/mt. Upbeat data from US and China on Tuesday renewed global economic recovery hopes and supported the red metal. Today, trading ranges are expected at $6,030-6,100/mt for LME copper and at 49,000-49,400 yuan/mt for the SHFE contract. Spot premiums may moderate to 110-140 yuan/mt as downstream consumers were cautious about restocking. 


Aluminium: Three-month LME aluminium hovered in a broad range between $1,615-1,626/mt, closing higher on the day at $1,618/mt, extending a price rally. The most-liquid SHFE August contract also trended upward, rising to a session high of 13,850 yuan/mt, which is close to the peak level back in January, and ending higher on the day at 13,900 yuan/mt. The contract is seen trading between 13800-14100 yuan/mt today with spot premiums elevated. 


Zinc: Three-month LME zinc weakened overnight amid a buildup of shorts, which sent prices down to a session low of $2,037/mt before they finished at $2,037/mt, down 0.88% on the day. Open interest added 234 lots to 194,000 lots. LME zinc inventories continued to edge lower on Tuesday, falling 0.22% or 275 mt to stand at 122,575 mt. Little support from fundamentals dampened investors prospects for zinc prices, but expectations of more stimulus measures from governments will cap any downsides in prices. Today, LME zinc is seen trading between $2,010-2,060/mt. 
The most-active SHFE August contract followed its LME counterpart lower last night. It accelerated declines near closing, hitting a session low of 16,690 yuan/mt and closed the day 100 yuan/mt lower at 16,705 yuan/mt. Support remained from the 10-day moving average. Trading range today is expected at 16,500-17,000 yuan/mt with spot premiums of 0# domestic Shuangyan zinc at 80-100 yuan/mt. 


Nickel: Three-month LME nickel found support from the 10-day moving average after it slipped below the daily moving average to $12,710/mt. It closed at $12,805/mt Tuesday, up $35/mt, or 0.27% on the day. Opening at $12,805/mt today, LME nickel may trade with pressure from $12,800/mt. 
The most-active SHFE August contract failed to hold onto gains from the daytime, as it broke down 102,000 yuan/mt and closed the day 1,030 yuan/mt lower at 101,750 yuan/mt. Support from 102,000 yuan/mt will be monitored today. 


Lead: Three-month LME lead stemmed its increase amid a board decline in base metals during the European trading hours. It closed the day 1.06% lower at $1,778.5/mt, following a session low of $1,771/mt. The most-traded SHFE contract came off after climbed to a high of 14,915 yuan/mt, ending up 0.65% on the day at 14,800 yuan/mt. Technical indicators remain bullish for the short term. 


Tin: Three-month LME tin gave up gains from the prior session as it pulled back from a session high of $16,945/mt to hit a low of $16,690/mt, before closing down $40/mt on the day at $16,770/mt. Support below is expected from $16,500/mt today. 
The most-active SHFE August contract slipped on departing longs, ending overnight at 138,400 yuan/mt. It will likely trade with support below from 137,000 yuan/mt and pressure above from 139,000 yuan/mt today. 

 

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM‘s internal database model. They are for reference only and do not constitute decision-making recommendations.

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