SMM Morning Comments (Jul 8): Shanghai base metals mixed as coronavirus woes sapped confidence

SHANGHAI, Jul 8 (SMM) – Shanghai nonferrous metals traded mixed on Wednesday morning, as a resurgence of coronavirus infections in some parts of the world shook market confidence.

Nonferrous metals traded mixed on Tuesday. On the LME, lead and copper advanced 0.9% on the day, zinc rose 0.7%, while aluminium and nickel closed flat. Tin shed 0.7%.

On the SHFE, copper climbed 0.9% in overnight trading, lead rose close to 0.8% and zinc edged up 0.03%, while nickel dipped 0.1%, tin shed 0.2% and aluminium lost 0.9%.

The US dollar index, which tracks the greenback against a basket of its peers, were steady in the morning of Asian trading hours on Tuesday after a rebound in the previous session. Oil prices, meanwhile, rose despite data from the American Petroleum Institute (API) showing an increase in US crude supplies last week.

Copper: Three-month LME copper rallied to a new more than five-month peak of $6,195/mt on Tuesday, before finishing the day 0.86% higher at $6,193/mt. It is expected to trade between $6,150-6,220/mt today.

The most-active SHFE August contract also rallied in overnight trading, notching its highest since late December 2019 at 49,860 yuan/mt, before ending up 0.89% at 49,830 yuan/mt.

Persistent concerns over mine supply from Chile where the coronavirus situation is still far from being under control lent strong support to copper prices.

Aluminium: Three-month LME aluminium held onto one-month highs on Tuesday, ending flat at $1,635/mt in choppy trading. It is likely to continue to move between $1,620-1,660/mt today.

The load-up of short positions sent the most-liquid SHFE August contract to a session-low of 13,945 yuan/mt in overnight trading, before the contract recovered some ground to end down 0.85% at 13,995 yuan/mt as shorts trimmed positions. The spot market weakened, and inventories in some regions rebounded. The SHFE August contract is expected to move between 13,900-14,200 yuan/mt today, with support at the 10-day moving average under scrutiny.

Zinc: Three-month LME zinc recovered from an earlier slip to close 0.73% firmer at $2,067.5/mt. Zinc inventories across LME warehouses extended their decline on Tuesday, falling 0.1%, or 125 mt to 122,150 mt. The contract is expected to trade between $2,030-2,080/mt today. 

The most-active SHFE August contract fluctuated to end a tad firmer at 16,770 yuan/mt in overnight trading. Macro optimism offered support, while weak fundamentals weighed. The SHFE August contract is expected to continue to trade at 16,400-16,900 yuan/mt today. Spot premiums for 0# domestic Shuangyan are seen slightly lower at 60-70 yuan/mt over the July contract.

Nickel: Three-month LME nickel closed flat at $13,400/mt on Tuesday, after a choppy trading session which saw the contract hitting a new more than five-month high of $13,485/mt. The contract remains above the upper Bollinger band.

The most-active SHFE October contract reversed earlier gains to end 0.12% weaker at 107,160 yuan/mt in overnight trading. It remains above the upper Bollinger band and the five-day moving average, and whether it could hold above the 107,000 mark will come under scrutiny today.

Lead: Three-month LME lead reversed an earlier slip to a four-month peak of $1,833/mt on Tuesday, before it erased some gains to close 0.89% higher at $1,811/mt, registering a three-day winning streak. Data showed that lead stocks across LME warehouses extended their decline, suggesting that consumption ex-China gradually recovers and that will lift LME lead in the short term.  

The most-traded SHFE contract strengthened 0.75% to end at a session-high of 14,750 yuan/mt in overnight trading. It is expected to remain rangebound in the short term, taking a breather from the recent pull-back.

Tin: Three-month LME tin came off from a four-week high of $17,165/mt on Tuesday and finished the day 0.7% lower at $16,980/mt. It remains above the five-60 day moving averages, and support is seen at 16,870.

The entry of longs helped the most-active SHFE September contract recover from opening losses to end 0.24% lower at 141,250 yuan/mt in overnight trading. It now sits around the five-day moving average, while pressure is seen at 142,500.