SMM Morning Comments (Jul 21): Shanghai base metals steadied with investor sentiment supported by positive vaccine news

SHANGHAI, Jul 21 (SMM) – SHFE nonferrous metals were steady on Tuesday morning, holding onto overnight gains, as investor sentiment was supported by a slew of positive news on the coronavirus vaccine front.

In overnight trading, metals moved higher for the most part. Zinc crept up 1.1% in overnight trading, lead rose 0.9%, tin climbed 0.8%, copper advanced 0.6% while aluminium stayed flat. Nickel edged down 0.1%.

On the LME, nonferrous metals were also mostly higher, building on the previous session's bounce. On Monday, LME lead advanced 0.9% to lead the gains, zinc climbed 0.8%, tin and copper rose 0.6% and nickel gained 0.5%, while aluminium bucked the trend with a paltry 0.03% dip. 

The US dollar index, which measures the greenback against a basket of its peers, slipped to its weakest in more than four months at 95.605 in the morning of Asian trading hours on Tuesday, while oil prices climbed.

Copper: Three-month LME copper advanced 0.58% to $6,474.5/mt on Monday, after hitting an intraday high of 6,522.5 earlier in the session. It is expected to trade between $6,470-6,530/mt today.

The most-active SHFE September contract climbed to a session-high of 52,310 yuan/mt in overnight trading, before easing to end 0.55% higher at 51,650. It is likely to move at 51,800-52,200 yuan/mt today. Spot premiums are seen firm at 60-120 yuan/mt as traders need to fulfill their long-term contracts.

Supply concerns and capital inflows are likely to continue to provide traction to copper prices in the near term.

Aluminium: Three-month LME aluminium closed little changed at $1,662.5/mt on Monday in choppy trading. It is likely to move at $1,650-1,690/mt today.

The most-active SHFE August contract reversed earlier gains to end flat at 14,240 yuan/mt in overnight trading. Recovering demand, low social inventories and high spot premiums remain supportive to SHFE aluminium, with the August contract expected to trade at 14,000-14,400 yuan/mt today.

Zinc: Three-month LME zinc rallied after plummeting to its lowest in more than a week at $2,162/mt, and finished the day 0.78% higher at 2,198.5. Data showed that zinc stocks across LME warehouses continued their moderate decline on Monday, dipping 0.57%, or 700 mt to 121,700 mt. LME zinc is expected to trade between $2,170-2,220/mt today.

The most-traded SHFE September contract followed its LME counterpart higher to a session-high of 17,960 yuan/mt in overnight trading, before the entry of shorts forced it to give up some gains to end 1.08% higher at 17,815. The September contract is expected to move at 17,500-18,000 yuan/mt today, while spot premiums for domestic 0# Shuangyan are seen at 110-120 yuan/mt over the August contract.

Nickel: Three-month LME nickel boomeranged on Monday, climbing from a one-week low of $13,070/mt to an intraday high of 13,350 before relinquishing some gains to end 0.53% higher at 13,185. Whether it could shrug off resistance at the 10-day moving average will come under scrutiny.

The most-active SHFE October contract plunged after hitting a session-high of 106,720 yuan/mt in overnight trading, and closed 0.12% lower at 105,500. It still resides around the 20-day moving average, and is likely to hover at 105,000-107,000 today.

Lead: Three-month LME lead slipped to a two-week trough of $1,804/mt on Monday before rebounding to finish the day 0.85% firmer at 1,829. It is likely to remain rangebound in the short term.

The most-active SHFE September contract strengthened 0.85% to end at 14,885 yuan/mt in overnight trading. The onset of a high season is likely to push SHFE lead higher.

Tin: Three-month LME tin rose to a one-week high of $17,410/mt on Monday before erasing some gains to close 0.64% firmer at 17,375. Support is seen at the five-day moving average, while pressure is at 17,450.

The most-liquid SHFE September contract strengthened 0.78% to end at 141,690 yuan/mt in overnight trading, after hitting a session-high of 142,060 earlier in the session as longs piled into the market. It has shrug off a resistance confluence of the five- and 10-day moving averages, and now faces pressure at 143,000.