SMM Morning Comments (Jul 2): SHFE base metals mixed; copper hit new more than 5-month high

SHANGHAI, Jul 2 (SMM) – SHFE nonferrous metals traded on a mixed note on Thursday morning, as investors assessed a string of economic data.

Copper extended its ascent to its highest since mid-January at 49,570 yuan/mt, aluminium advanced, and tin clawed back some of overnight losses. Zinc, nickel and lead fell, with lead diving into negative territory.

The changes to the nonferrous complex on the SHFE were moderate in overnight trading. Nickel advanced nearly 0.6% to be the biggest gainer, lead rose 0.4%, aluminium climbed 0.3% and copper edged up 0.2%, while zinc and tin fell 0.3%.

On the LME, base metals, except for tin and lead, closed higher on Wednesday, though their gains were no more than half a percent. Zinc rose nearly 0.5% to lead the gains, nickel climbed 0.4%, aluminium and copper inched up about 0.3%, while tin and lead dipped about 0.1%.

On the coronavirus front, there were positive news overnight around the development of a potential vaccine. A study of a coronavirus vaccine candidate being developed by Pfizer and BioNTech showed the drug created neutralizing antibodies. The results were released online, but have not been reviewed by a medical journal yet.

The closely-watched monthly US nonfarm payroll report is set to be released Thursday at 8:30 a.m. ET. Meanwhile, the weekly jobless claims data will also be released Thursday.

Copper: Three-month LME copper hit its highest since January 23 at $6,094/mt in Asian trading hours, before easing to close the day 0.28% firmer at $6,056/mt.

The most-active SHFE contract strengthened 0.16% to end at 49,180 yuan/mt in volatile trading overnight.

Aluminium: Three-month LME aluminium notched a fresh three-week high of $1,627/mt, before ending the day 0.34% higher at $1,624/mt. It is likely to move between $1,600-1,640/mt today.

The most-liquid SHFE August contract climbed to a session-high of 14,035 yuan/mt, before easing to finish overnight trading 0.29% firmer 13,975 yuan/mt. With firm spot premiums in the physical market and wider discounts against the July contract, the SHFE August contract is expected to move between 13,900-14,200 yuan/mt today.

Zinc: Three-month LME zinc rallied after falling below the 20-day moving average to a one-week low of $2,017/mt in late European trading hours, and closed the day 0.47% higher at $2,046.5/mt. LME zinc inventories continued to edge lower on Wednesday, falling 0.02% or 25 mt to 122,550 mt. Hopes for a consumption recovery ex-China driven by infrastructure investment packages bolstered LME zinc, while coronavirus concerns capped gains. Today, LME zinc is expected to trade between $2,010-2,060/mt.

Opening losses kept the most-active SHFE August contract in negative territory during the entire overnight trading session, which closed down 0.33% at 16,705 yuan/mt. The 20-day moving average offered support, while resistance is seen at the 10-day one. Weakening consumption and expectations of greater supply with smelters recovering or ramping up production, weighed on SHFE zinc. The SHFE August contract is expected to trade at 16,400-16,900 yuan/mt today with spot premiums for 0# domestic Shuangyan at 90-110 yuan/mt.

Nickel: Three-month LME nickel rebounded after plunging below the five-20 day moving averages to a session-low of $12,605/mt in late European trading hours, and finished the day 0.35% higher at $12,850/mt. Strength at the 12,800 mark where the five- and 20-day moving averages converge should be closely watched today.

The most-active SHFE August contract rose, paring earlier losses, to close 0.55% higher at 102,580 yuan/mt in overnight trading. With no major bearish or bullish factors on fundamentals, SHFE nickel has been moving sideways over the past month and is expected to remain rangebound in the short term.

Lead: Three-month LME lead weakened 0.14% to end at $1,776/mt on Wednesday, and the trading was choppy with the contract touching a one-week trough of $1,758.5/mt before bouncing to a session-high of $1,793/mt.

The most-traded SHFE contract scaled a new four-month peak of 14,940 yuan/mt in overnight trading, before erasing some gains to close up 0.4% at 14,885 yuan/mt.

Tin: Three-month LME tin dipped 0.06% to $16,760/mt on Wednesday in chopping trading. Support remains at the 16,500 mark.

The influx of shorts forced the most-active SHFE contract to give up earlier gains to a session-low of 137,800 yuan/mt in overnight trading, before the contract ended down 0.3% at 137,940 yuan/mt. Support is seen at 136,500 yuan/mt.