SMM Morning Comments (Jul 15): Base metals stabilised after Tuesday’s pull-back

SHANGHAI, Jul 15 (SMM) – Nonferrous metals were steady on Wednesday morning, after pullbacks in the previous session, as investors digested rising tensions between the US and China and hopes for a coronavirus vaccine.

On Tuesday, nonferrous metals fell across the board, taking a breather from the recent rally. On the LME, zinc plunged 2.8% to lead losses, lead tumbled 1.8%, nickel dropped 0.9%, copper fell 0.7%, tin shed nearly 0.6% and aluminium sank 0.4%.

On the SHFE, zinc was also the worst performer and fell 1.1% in overnight trading, aluminium dropped 0.9%, tin shed 0.5%, nickel lost 0.4%, lead dipped 0.3% and copper edged down less than 0.1%.

The US dollar index, which tracks the greenback against a basket of its peers, touched a new nearly five-week trough of 96.010 in the morning of Asian trading hours on Wednesday, while oil prices, edged higher, after the American Petroleum Institute (API) reported declines in US supplies of crude and gasoline for last week.

Copper: Three-month LME copper was hemmed in a range after opening lower on Tuesday, and ended down 0.7% at $6,500/mt. It is expected to trade between $6,530-6,590/mt today.

The most-active SHFE August contract edged down 0.08% to 52,360 yuan/mt in overnight trading. It is likely to trade between 52,450-52,850 yuan/mt today. Spot premiums are seen narrower to 10-30 yuan/mt as the SHFE July contract expires on Wednesday.

Strong fundamentals will continue to provide traction to copper prices after a brief correction.  

Aluminium: Three-month LME aluminium eased 0.44% to $1,682.5/mt on Tuesday in choppy trading. It is likely to move between $1,670-1,710/mt today.

The most-liquid SHFE August contract slipped 0.89% to close at 14,450 yuan/mt in overnight trading. Low social inventories in China will remain supportive of SHFE aluminium. The SHFE August contract is expected to move between 14,300-14,700 yuan/mt today.

Zinc: Three-month LME zinc shed 2.77% to end at $2,192/mt on Tuesday, after touching a session-low of $2,170/mt earlier in the session, snapping a six-day winning streak. Data showed that zinc stocks at LME warehouses fell 275 mt, or 0.22% to 123,200 mt on Tuesday. The contract is expected to move between $2,190-2,240/mt today. 

Tracking losses in its LME counterpart, the most-active SHFE September contract eased 1.08% to 17,885 yuan/mt in overnight trading, near the upper Bollinger band. Expectations of an improvement in domestic consumption will offer some support to SHFE zinc. The SHFE September contract is expected to trade at 17,700-18,200 yuan/mt today. Spot premiums for 0# domestic Shuangyan are seen slightly higher at 50-70 yuan/mt over the August contract.

Nickel: Three-month LME lead plunged to a session-low of $13,390/mt in early Asian trading hours on Tuesday, and later recovered some ground to close the day 0.91% lower at $13,600/mt. Whether it could remain above the 13,600 mark will come under scrutiny today.

The most-active SHFE October contract weakened 0.39% to end at 108,600 yuan/mt in overnight trading. It now resides around the five-day moving average at 108,800, and pressure from 109,000 will come under scrutiny today.

Lead: Three-month LME lead came off from highs in almost five months on Tuesday, shedding 1.78% to $1,851/mt. With support from the five-day moving average, LME lead has yet to derail from its uptrend.

The most-traded SHFE August contract slipped to a session-low of 15,310 yuan/mt in overnight trading, before recouping some losses to end 0.29% weaker at 15,405 yuan/mt.

Tin: Three-month LME tin lost 0.55% to $17,285/mt in volatile trading on Tuesday. Support is seen at the 10-day moving average at 17,100, while pressure is at 17,450.

The most-active SHFE September contract fell 0.48% to 142,430 yuan/mt in overnight trading. Support is seen at the 10-day moving average at 141,000, while pressure is at 143,000.