SMM Morning Comments (Jul 10): Base metals mixed as virus fears offset recovery hopes

SHANGHAI, Jul 10 (SMM) – Nonferrous metals traded mixed on Friday morning, as fears over rising US coronavirus cases appeared to offset hopes of a potential economic recovery.

The nonferrous metals also saw mixed performance on Thursday. On the LME, nickel plunged more than 2% and aluminium fell nearly 1%, while lead advanced 0.8%, zinc and tin rose 0.9%. Copper closed 1% higher after scaling a 14-month peak earlier in the session.

On the SHFE, the nonferrous complex had a wild session in overnight trading after opening broadly higher. Nickel dropped 1.5% and tin lost 0.3%, while copper inched up 0.2%, aluminium advanced 0.3%, zinc rose 0.7% and lead climbed 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 Friday after a rally from four-week lows in the previous session. Oil prices, meanwhile, fell slightly following sharp losses in the previous session.

Copper: Three-month LME copper scaled its highest since May 2019 at $6,360/mt on Thursday, before erasing some gains to close up 0.98% at $6,297/mt. It is expected to trade between $6,250-6,320/mt today.

The most-active SHFE August contract inched up 0.24% to 50,490 yuan/mt in overnight trading, after slipping to a session-low of 50,200 yuan/mt earlier in the session. It is likely to trade between 50,300-50,700 yuan/mt today. Spot prices are seen at a discount of up to 10 yuan/mt to a premium of up to 30 yuan/mt as traders are keen to cash in at highs.

Concerns over rising US coronavirus cases will weigh on copper prices, but prices will remain supported by concerns over mine supply from South America.

Aluminium: Three-month LME aluminium fell on Thursday after notching its highest since March 13 at $1,695.5/mt, closing 0.96% lower at an intraday low of $1,649/mt. It is likely to move between $1,640-1,680/mt today.

The most-liquid SHFE August contract eased from a nearly six-month peak of 14,330 yuan/mt in overnight trading to close 0.28% firmer at 14,255 yuan/mt in overnight trading. Low social inventories and tight spot availability lent support to aluminium prices. The SHFE August contract is expected to move between 14,100-14,400 yuan/mt today.

Zinc: The longs pulled three-month LME zinc to the highest since February 18 at $2,168/mt before the contract finished the Thursday’s session 0.89% higher at $2,148.5/mt, registering a four-day winning streak and breaking above the upper Bollinger band. Zinc inventories across LME warehouses extended their decline on Thursday, falling 0.14%, or 175 mt to 121,775 mt. The contract is expected to trade between $2,120-2,170/mt today. 

Dip-buying helped the most-active SHFE August contract recovered from an earlier slip on the entry of shorts in overnight trading, and the contract ended up 0.72% at 17,530 yuan/mt, above the upper Bollinger band. Macro optimism bolstered SHFE zinc, while gains were capped by weak fundamentals. The SHFE August contract is expected to trade at 17,100-17,600 yuan/mt today. Spot premiums for 0# domestic Shuangyan are seen slightly lower at 50-60 yuan/mt over the July contract.

Nickel: Three-month LME nickel plunged after hitting a new more than five-month high of $13,550/mt on Thursday, falling below the five-day moving average to close 2.04% lower at $13,205/mt. Whether it could remain above the 13,200 mark will come under scrutiny today. .

The most-active SHFE October contract also came off from a new more than five-month high of 108,800 yuan/mt in overnight trading, losing 1.54% to end at 105,610 yuan/mt. Overnight sharp losses have sent the contract below the five- and 10-day moving averages, and whether it could remain above the 105,000 mark will come under scrutiny today.

Lead: Three-month LME lead strengthened 0.83% to $1,830.5/mt on Thursday, after hitting an intraday high of $1,843/mt earlier in the session. It is likely to extend its gains amid improved risk appetite.

The most-traded SHFE contract hovered in a tight range in overnight trading, holding onto four-month highs to close 0.94% firmer at 15,075 yuan/mt. It has entered an uptrend after breaking its previous range.

Tin: Three-month LME tin surged to its highest since January 22 at $17,480/mt on Thursday, before easing some gains to end 0.88% higher at $17,250/mt. It has stood above the five-60 day moving averages, and now faces pressure at 17,500.

The withdrawal of longs forced the most-active SHFE September contract to give up opening gains and dive into negative territory to a session-low of 139,600 yuan/mt in overnight trading, before the contract recovered some ground to close down 0.31% at 140,320 yuan/mt. The contract now resides around the five-day moving average, with support at the 10-day one at 139,500.