SMM Evening Comments (Jul 22): Shanghai base metals closed higher for the second straight day, US-China tensions in focus

Published: Jul 22, 2020 18:34 (GMT+8)
SHFE nonferrous metals rose across the board on Wednesday July 22, trading higher for the second consecutive day, as investors sentiment remained upbeat on expectations of stimulus policy. Development of the US-China tensions will be the market focus.

SHANGHAI, Jul 22 (SMM) – SHFE nonferrous metals rose across the board on Wednesday July 22, trading higher for the second consecutive day, as investors sentiment remained upbeat on expectations of stimulus policy. Development of the US-China tensions will be the market focus. 


Zinc was the best performer with a rise of 1.15%. Copper advanced 1.06%, aluminium climbed 1.02%, lead rose 0.27%, tin expanded 0.83% and nickel added 0.6%.  


The ferrous complex also moved higher as iron ore extended increase and closed up 1.14%. Rebar grew 1.31%, hot-rolled coil gained 0.96%, stainless steel added 0.59% and coke edged up 0.03%. 

 

SMM data showed that long steel inventories in Guangzhou accelerated their declines this week as demand recovers after the wet season. 


Oil prices were under downward pressure amid concerns over a spike in coronavirus cases and as API data showed US crude inventories rose by 7.5 million barrels last week, as compared with expectations for a draw of 2.1 million barrels.


Copper: Loaded-up longs buoyed the most-traded SHFE September contract to a session high of 52,830 yuan/mt, before the contract pared some gains and finished the day 1.06% higher at 52,410 yuan/mt. Open interest increased 6,783 lots as investors added their long positions. Antofagasta on Wednesday reported a decline of 8.4% in its copper production in Q2, as the pandemic dragged its mining operations. This grew concerns of tighter ore supplies, which also supported copper prices. With optimistic signals from technical indicators, the SHFE contract may test 53,000 yuan/mt tonight. 


Aluminium: The most-liquid SHFE August contract again broke up the 10-day moving average to hit a session high of 14,450 yuan/mt before noon, and finished at 14,390 yuan/mt, up 1.02% on the day. Domestic social inventories of primary aluminium edged up but SHFE on-warrant inventories stayed at low levels. Support from fundamental may keep near-term aluminium prices stable. The impact of macro development on sentiment will be monitored. 


Zinc: The most-active SHFE September contract hit a session low of 17,920 yuan/mt and bounced back to close at 18,025 yuan/mt, up 1.15% on the day, as some short positions booked profits and left. Open interest grew 8,103 lots to 89,000 lots on the back of rising longs. Tonight, the contract may continue to find support from the five- and 10- day moving averages on slow recovery of smelters production and strength in domestic consumption.


Nickel: The most-traded SHFE October contract came off after it climbed above 108,420 yuan/mt in early trades this morning, ending the day 0.6% higher at 106,640 yuan/mt. The contract is expected to trade with support from the 20-day moving average and test pressure above in the near term. 


Lead: The most-active SHFE September contract opened at 15,085 yuan/mt, and finished the day 0.63% lower at 14,980 yuan/mt. Open interest increased 1,759 lots to 21,725 lots, and trade volume rose 7,651 lots to 20,571 lots. Downstream demand improved, but a high consumption season has not come yet. Whether SHFE lead will climb above the 10-day moving average will be monitored. SHFE lead is expected to fluctuate between the five-day and 10-day moving averages in the short term.  


Tin: The most-liquid SHFE September contract rose to an intraday high of 143,770 yuan/mt and finished the day 0.83% higher at 143,770 yuan/mt. Open interest shrank 831 lots to 26,738 lots. Pressure above is seen from 144,000 yuan/mt with support expected at the 10-day moving average, or 141,500 yuan/mt. 

 

 

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