SMM Evening Comments (Jul 3): Shanghai base metals ended the week broadly higher on upbeat economic data

Published: Jul 03, 2020 18:12 (GMT+8)
SHFE nonferrous metals, except for copper and lead, rose on Friday, following upbeat economic data out of the US and China, while lingering concerns over the coronavirus pandemic tempered optimism.

SHANGHAI, Jul 3 (SMM) – SHFE nonferrous metals, except for copper and lead, rose on Friday, following upbeat economic data out of the US and China, while lingering concerns over the coronavirus pandemic tempered optimism.

 

Nickel surged 3% to lead the gains, tin climbed 1.1%, aluminium advanced 0.5% and zinc gained 0.3%, while copper fell 0.7% and lead shed 1.2%.

 

For the week, the six metals ended in positive territory across the board as market sentiment was elevated by a string of upbeat economic data.

 

On the LME, nickel tracked gains in its SHFE counterpart, while other nonferrous metals fell as of 17:59 Beijing time.

 

US markets are closed on Friday for the July Fourth holiday.

 

On the economic data front, US nonfarm payrolls grew by a record 4.8 million in June, outstripping expectations of a 3 million rise, while a private survey showed that China’s services sector grew at its fastest pace in over a decade in June.

 

Copper: The withdrawal of longs pulled the most-traded SHFE August contract into negative territory, which erased overnight gains to close the day 0.71% lower at 48,900 yuan/mt, as eased concerns over supply dented morale among longs. But the contract gained 2.17% on the week, marking the seventh straight weekly increase.

SMM data showed that copper inventories in China rose sharply this week, marking the first weekly increase since late March, as high prices subdued demand while inflows of imported cargoes increased.

Data from Chile’s copper commission Cochilco, meanwhile, showed that the country’s copper mine output increased more than 3% year on year in the first five months of 2020, as the impact from the COVID-19 containment measures had not begun to take hold.

China’s top copper smelters on Friday set their floor treatment and refining charges (TC/RCs) for the third quarter of 2020 at $53/mt and 5.3 cents/lb, marking a sharp decrease from $67/mt and 6.7 cents/lb for Q1 of the year, as the team failed to reach an agreement for Q2.

 

Aluminium: The most-liquid SHFE August contract notched a new more than five-month high of 14,075 yuan/mt, before ending up 0.54% at 14,055 yuan/mt. For the week, it advanced 3.31%.

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 most-active SHFE August contract continued to see volatile trading during the daytime session, and ended up 0.33% at 16,745 yuan/mt. Macro optimism on the bullish side and sluggish spot trades and high social inventories on the bearish side kept SHFE zinc rangebound, which ended the week with a paltry 0.03% gain. SHFE zinc is expected to continue such a pattern in the short term.

SMM data showed that zinc inventories in China resumed decline this week, as arrivals reduced and as demand recovered in some regions on smaller spot premiums.

 

Nickel: As longs piled into the market, the most-traded SHFE August contract extended overnight gains to its highest in nearly four weeks at 105,460 yuan/mt before ending up 3.01% at 105,240 yuan/mt. Today’s sharp gains pulled the contract out of the range where it had been hovering for nearly three months. For the week, the contract rose 3.54%.  

 

Lead: The most active SHFE August contract extended overnight losses to a session-low of 14,615 yuan/mt, before closing down 1.18% at 14,650 yuan/mt. Thanks to gains ground out earlier in the week, the contract registered a weekly increase of 1.24%. Today’s losses have sent the contract below the five-day moving average, with support expected at the 10-day one.

SMM data showed that social inventories of lead ingots in China rose sharply this week, as buyers turned to secondary lead smelters on wider discounts while demand remained sluggish after some lead-acid battery producers shut for up to three days for the Dragon Boat Festival.

                                                                    

Tin: The most-liquid SHFE September contract broke above the 140,000 mark to a fresh more than five-month high of 140,240 yuan/mt, before relinquishing some gains to close up 1.13% at 139,790 yuan/mt, to produce a weekly gain of 1.14%.

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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