SMM Morning Comments (Jul 17): Shanghai base metals mixed after Thursday’s plunge

SHANGHAI, Jul 17 (SMM) – Nonferrous metals on the SHFE traded on a mixed note on Friday morning, following Thursday’s plunge amid sharp losses in mainland Chinese stocks.

In overnight trading, lead tumbled 1.2%, aluminium declined 0.4% and nickel sank 0.3%, while copper climbed 0.5%, tin rose 0.6% and zinc moved 0.9% higher.

On the LME, nonferrous metals rose across the board in European and North American trading hours on Thursday, recovering from losses made earlier in the session, and closed mixed. Nickel dropped 1% on the day, lead fell 0.8% and aluminium shed 0.6%, while copper inched up 0.2%, tin advanced 0.3% and zinc rose 0.6%.

The US dollar index, which tracks the greenback against a basket of its peers, was little changed in the morning of Asian trading hours on Friday, after a rebound in the previous session, while oil prices, edged lower as OPEC and other producers including Russia agreed to ease record supply curbs from August.

Copper: Three-month LME copper reversed an earlier slip to close 0.24% firmer at $6,410/mt on Thursday, after two consecutive days of losses. It is expected to trade between $6,370-6,430/mt today.

The SHFE August contract rose to a session-high of 51,670 yuan/mt before ending up 0.45% at 51,510 yuan/mt in overnight trading. The September contract has become the most actively traded copper contract on the SHFE and is likely to trade between 51,250-51,550 yuan/mt today. Spot premiums are seen higher to 40-50 yuan/mt on expectations of dip-purchases.

Positive fundamentals encouraged longs to return to the copper market after some losses, but rising coronavirus cases globally, a rebound in the US dollar index and increased downward pressure on oil prices after OPEC+ agreed to ease output curbs weighed on copper prices.

Aluminium: Three-month LME aluminium fell for a third straight day on Thursday, shedding 0.6% to $1,668.5/mt. It is likely to move between $1,650-1,690/mt today.

The most-liquid SHFE August contract rose slightly from lows in more than a week in overnight trading, but remained in negative territory and closed down 0.35% at 14,145 yuan/mt. Low social inventories in China will continue to offer support, while eased spot tightness after the expiry of the SHFE July contract and profit-taking in the broad markets weigh. The SHFE August contract is expected to move between 14,000-14,400 yuan/mt today.

Zinc: The rally in European and North American trading hours lifted tree-month LME zinc into positive territory, which gained 0.59% to finish Thursday’s trading session at $2,214/mt. Data showed that zinc stocks at LME warehouses continued to trend lower on Thursday, falling 450 mt, or 0.37% to 122,525 mt. The contract is expected to move between $2,170-2,220/mt today. 

The most-active SHFE September contract followed its LME counterpart higher in overnight trading, rising to a session-high of 17,970 yuan/mt before easing to close 0.85% higher at 17,865 yuan/mt. It is supported by the 10-day moving average, while faces resistance at the upper Bollinger band. The contract is expected to trade at 17,500-18,000 yuan/mt today. Spot premiums for 0# domestic Shuangyan are seen at 90-110 yuan/mt over the August contract.

Nickel: Three-month LME lead fell to a session-low of $13,210/mt before recovering some ground to close 1% lower at $13,400/mt on Thursday, registering a three-day losing streak.

The most-active SHFE October contract weakened 0.32% to end at 106,920 yuan/mt in overnight trading, after briefly crossing into positive territory to a session-high of 107,320 yuan/mt earlier in the session. It now faces pressure from the five- and 10-day moving averages.

Lead: Three-month LME lead weakened 0.76% to $1,839.5/mt on Thursday, after touching a session-low of $1,824/mt earlier in the session. The uptrend in LME lead seemingly has yet to come to an end.

The most-traded SHFE August contract hovered around one-week lows in overnight trading, shedding 1.19% to 14,910 yuan/mt in overnight trading. Whether it could remain above the 20-day moving average will come under scrutiny.

Tin: Three-month LME tin strengthened 0.26% to $17,340/mt on Thursday, after slipping to a session-low of $17,055/mt earlier in the session. It now resides around the five-day moving average, and still faces pressure at 17,450.

The most-active SHFE September contract hit a session-high of 142,150 yuan/mt before erasing some gains to close 0.58% firmer at 141,460 yuan/mt in overnight trading. It now stays below the five- and 10-day moving averages, and faces pressure at 141,500.