SMM Evening Comments (Jul 2): SHFE base metals closed mostly higher amid coronavirus vaccine hopes

SHANGHAI, Jul 2 (SMM) – SHFE nonferrous metals closed higher for the most part on Thursday, as market sentiment was elevated by positive news surrounding the development of a potential coronavirus vaccine and upbeat economic data.

Nickel advanced 0.7% to lead the way higher, copper rose 0.6%, aluminium gained 0.2% and zinc inched up 0.1%, while tin stayed flat. Lead shed 0.2%.

On the LME, the nonferrous complex, except for aluminium, were higher at 17:36 Beijing time.

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 tonight.

US markets will be closed on Friday for the July Fourth holiday.

Copper: The most-traded SHFE August contract steadied after hitting its highest since mid-January at 49,570 yuan/mt in early morning trade, and finished the day 0.63% higher at 49,410 yuan/mt. The strong rally in copper prices was primarily propelled by concerns over mine supply as the coronavirus rages on in the top producer Chile.

Miner BHP said Wednesday it would begin to ramp down activity at its small Cerro Colorado copper mine in Chile.

Data from China customs showed that China’s imports of copper ore and concentrate dropped in May as the anti-virus lockdown measures began to take their toll.

Chilean copper miner Antofagasta has agreed to supply Chinese smelters Tongling Nonferrous and Jiangxi Copper with copper concentrates in the first half of 2021 at treatment and refining charges (TC/RCs) of $60.8/mt and 6.08 cents/lb.

Aluminium: The most-liquid SHFE August contract slipped to a session-low of 13,920 yuan/mt before recovering some ground to end up 0.22% at 13,965 yuan/mt.

SMM data showed that social inventories of primary aluminium ingots in China continued to fall this week, while those of aluminium billet rebounded.

Zinc: The load-up of long positions lifted the most-active SHFE August contract to a session-high of 16,815 yuan/mt, recouping its earlier losses, before the contract closed a tad higher at 16,775 yuan/mt. SHFE zinc remains rangebound after stemming its pull-back as investors weigh deteriorating fundamentals—weakening consumption in a low season, recovering supply from mines on seasonality and increasing supply from smelters on widening margins—against macro optimism. The contract is expected to continue to move sideways tonight.

Nickel: The most-traded SHFE August contract reversed an earlier slip to a session-high of 102,850 yuan/mt, before closing up 0.72% higher at 102,750 yuan/mt. With little change to its weak fundamentals, SHFE nickel is expected to continue to hover around moving averages above the 100,000 mark in the short term.

Lead: The liquidation of long positions forced the most active SHFE August contract to give up overnight gains and dive into negative territory, which touched a session-low of 14,710 yuan/mt before ending down 0.24% at 14,790 yuan/mt. The contract has yet to fall below the five-day moving average, and is expected to continue to hover above that level tonight.

Tin: The most-liquid SHFE September contract rose, paring overnight losses, to close flat at 138,350 yuan/mt. Support is seen at 137,000, while pressure is at 139,500.