SMM Evening Comments (Jul 10): Shanghai base metals closed mixed for the week, ferrous metals retreated on Friday

SHANGHAI, Jul 10 (SMM) – SHFE nonferrous metals traded higher for the most part on Friday July 10, ending mixed for the week, as investors continued to weigh the prospects for global economic recovery and uncertainty over the coronavirus pandemic.

Bullish market sentiment has somewhat eased after data from the US showed that its weekly unemployment claims have stayed above 1 million for 15 consecutive weeks, as workers struggle to get back to their jobs amid rising coronavirus cases.

Aluminium led the gains with a rise of 1.13% on Friday. Copper edged up 0.26%, lead grew 0.9%, zinc slowed its increase and climbed 0.86%, while tin slipped 1.31% and nickel lost 1.69%. 

The ferrous complex pulled back on Friday following a strong performance in previous sessions. Iron ore eased 0.06%, rebar dropped 0.81%, hot-rolled coil slipped 0.51%, stainless steel lost 0.89% and coke fell 1.81%. 

SMM data showed that inventories of seaborne iron ore at Chinese ports continued to trend higher this week, as swiftly rising prices kept steel mills cautious about procurement and as eased port congestion allowed cargoes to enter warehouses.

Copper: The most-traded SHFE August contract hovered at high levels, supported by continued concerns that the COVID-19 pandemic and potential workers’ strike will disrupt mine production in Chile. The contract closed 130 yuan/mt higher on the day at 50500 yuan/mt, following a session high of 50,660 yuan/mt. Open interest shrank 5219 lots to 116,000 lots as some investors cut their long positions. SMM expects bullish signals from technical indicators to see the contract testing higher levels tonight. 

SMM data showed that copper stocks in Shanghai bonded areas rebounded 1,500 mt week on week to 210,000 mt as of Friday July 10, following after a decline of 1,000 mt in the prior week.

Aluminium: The most-liquid SHFE August contract extended an upward trend as investors continued to load up longs, on the back of increased confidence amid tight supply in the spot market. The contract climbed to a session high of 14,465 yuan/mt and finished at 14,375 yuan/mt, up 160 yuan/mt on the day. The SHFE July contract grew a significant 270 yuan/mt to end at 14,815 yuan/mt, lifted by exiting short positions. Tonight, prices may slightly moderate but will stay at relatively high levels. 

Zinc: The most-active SHFE August contract held onto gains from the previous session, but its upward momentum seemed to weaken after the recent price rally, as it stemmed increase at 17,755 yuan/mt and closed the day 0.86% higher at 17,555 yuan/mt. As macro optimism eases, the contract may move sideways tonight. 

SMM data suggested that zinc inventories in China continued to fall this week, primarily propelled by losses in Shanghai and Guangdong where demand improved.

Nickel: The most-traded SHFE October contract gave up gains from the week as risk aversion sentiment drove investors to cut long positions, ending the contract at 105,450 yuan/mt, down 1.69% on the day. There remained some support from longs, which may keep the contract above 105,000 yuan/mt and see it testing 108,000 yuan/mt next week. 

Nickel ore inventories across all Chinese ports declined 200,000 wmt from July 3 to 7.88 million wmt as of July 10, showed SMM data.

Lead: The most-active SHFE August contract hovered in a broad band around the daily moving average, rising to an intraday high of 15,175 yuan/mt and ending up 0.9% on the day at 15,070 yuan/mt. SHFE on-warrant inventories expanded 1,388 mt on Friday to 20,314 mt. SMM expects the contract to stay firm at highs around 15,100 yuan/mt tonight.  

Tin: The most-liquid SHFE September contract relinquished increase from earlier this week, as a decline in longs and buildup of shorts sent the contract to a session low of 138,610 yuan/mt, before it closed 1.31% lower on the day at 138,900 yuan/mt. Support below is seen from the Bollinger middle band and 137,500 yuan/mt.