SMM Morning Comments (Jul 3): Shanghai base metals mixed following better-than-expected US jobs data

Published: Jul 03, 2020 10:06 (GMT+8)
In overnight trading, nonferrous metals on the SHFE traded mostly higher. Nickel jumped 1.1% to lead the way higher, tin climbed 0.8%, copper gained 0.3% and zinc advanced 0.2%, while aluminium stayed flat. Lead shed 0.6%.

SHANGHAI, Jul 3 (SMM) – Shanghai nonferrous metals traded on a mixed note on Friday morning, as investors assessed the latest US jobs report. Nickel, lead and aluminium rose, while copper, zinc and lead saw volatile trading.

 

In overnight trading, nonferrous metals on the SHFE traded mostly higher. Nickel jumped 1.1% to lead the way higher, tin climbed 0.8%, copper gained 0.3% and zinc advanced 0.2%, while aluminium stayed flat. Lead shed 0.6%.

 

LME base metals, except for zinc and lead, closed higher on Thursday, though their gains were no more than 0.7%. Tin rose nearly 0.7% to lead the gains, copper climbed 0.6%, nickel advanced 0.5%, aluminium inched up 0.03%, while zinc dipped 0.1% and lead fell 0.2%.

 

The US Labor Department reported on Thursday that US nonfarm payrolls increased by 4.8 million jobs in June, the most since the government started keeping records in 1939 and beating expectations. The unemployment rate fell to 11.1% from 13.3% in May.

 

A separate report from the Labor Department, however, showed that initial US jobless claims rose by 1.427 million in the week ending June 27. The data also showed the number of continuing claims — the number of people receiving unemployment benefits for consecutive weeks — rose to 19.29 million, an increase of about 59,000.

 

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

 

In China, a private survey showed Friday that China’s services sector showed it growing at its fastest pace in over a decade in June, with the Caixin/Markit services purchasing managers’ index (PMI) coming in at 58.4 for the month. That was the highest print since April 2010, and compared with May’s 55.0 reading. The 50 level in PMI readings separates growth from contraction on a monthly basis.

 

Copper: Three-month LME copper hit a new more than five-month high of $6,120/mt before closing the day 0.62% higher at $6,093.5/mt. It is expected to trade between $6,060-6,120/mt today.

The most-active SHFE contract strengthened 0.26% to 49,380 yuan/mt in volatile trading overnight. It is likely to move between 49,200-49,500 yuan/mt. Spot premiums are seen lower to a maximum of 20 yuan/mt as weak demand and high prices forces traders to slash their quotes.

Concerns over ore supply remain supportive of copper prices. 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: Three-month LME aluminium was little changed in choppy trade on Thursday, rebounding from a session-low of $1,613/mt to a more than three-week high of $1,630/mt before ending at $1,624/mt.

The most-liquid SHFE August contract also capped a volatile trading session overnight and closed flat at 13,980 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: Three-month LME zinc eased after notching a session high of $2,075/mt as longs were cautious, and closed the day 0.12% lower at $2,044/mt. LME zinc inventories continued to edge lower on Thursday, falling 0.02% or 25 mt to 122,525 mt. Pause on economic reopening in some regions amid the resurgence of coronavirus cases, and high US unemployment rate weighed on LME zinc, which is expected to trade between $2,010-2,060/mt today.

The most-active SHFE August contract gained 0.21% to 16,725 yuan/mt in volatile trading overnight, with support from the 20-day moving average. Weakening consumption, easing ore supply tightness and expectations of greater supply with smelters recovering or ramping up production, limit upside in 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 80-90 yuan/mt over the July contract.

 

Nickel: Three-month LME nickel hit a two-week high of $12,965/mt in early European trading hours, reversing earlier, moderate losses, before it closed up 0.54% at $12,920/mt. The contract has risen for five consecutive trading days, standing above the five-60 day moving averages and near the upper Bollinger band. Whether it could shrug off resistance at the 13,000 mark will come under scrutiny.    

The most-active SHFE August contract rose to its highest since June 22 at 103,400 yuan/mt before stabilising to finish overnight trading 1.07% higher at 103,250 yuan/mt. The load-up of long positions primarily accounted for overnight gains in SHFE nickel. Whether the contract could break above the 103,400 mark will come under scrutiny today.

 

Lead: Three-month LME lead weakened 0.2% to end at $1,772.5/mt on Thursday in choppy trading. It is expected remain rangebound in the short term, with support at the 20-day moving average.

The most-traded SHFE contract slipped to a session-low of 14,650 yuan/mt, before recovering some ground to end down 0.64% at 14,730 yuan/mt in overnight trading. With support at the 10-day moving average, the contract is expected to hang onto its recent highs.

 

Tin: Three-month LME tin fluctuated to end at a session-high of $16,870/mt, up 0.66% on the day. It now sits around the five-, 10- and 20-day moving averages, and faces pressure at 16,950.

The most-active SHFE September contract rose overnight, and gains accelerated shortly before closing. It hit a more than five-month high of 139,500 yuan/mt before ending up 0.79% at 139,320 yuan/mt. Pressure is seen at previous highs around 140,500.

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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