SMM Evening Comments (Jul 27): Shanghai base metals ended mostly higher on Monday

SHANGHAI, Jul 27 (SMM) – SHFE nonferrous metals, except for copper, closed higher on Monday July 27, as positive manufacturing data from the eurozone and US reinforced expectations of global economic recovery from the COVID-19 pandemic. 

But investors remained cautious amid concerns over growing diplomatic tensions between China and the US, as the US consulate in Chengdu had closed today, according to reports. 

Tin was the best performer with a rise of 2.83%. Nickel advanced 2.04%, aluminium rose 0.14%, lead climbed 1.54%, zinc added 0.39%, while copper shed 0.39%.

The ferrous complex traded mostly lower as iron ore continued to give up previous gains and fell 1.99%. Rebar slipped 1.22%, hot-rolled coil dipped 1.13%, coke dropped 1.63%, while stainless steel increased 0.73%. 

Copper: The most-traded SHFE contract traded rangebound today with an intraday high of 51,870 yuan/mt, ending down 0.39% on the day at 51,600 yuan/mt. Open interest shrank 164 lots to 113000 lots as investors cut their short positions. Pandemic-triggered uncertainty around copper mining in South America underpinned the red metal. Customs data showed that China’s copper concentrate imports from Peru decreased 28.75% year on year in June, and this also grew worries about tight supply. Tonight, the contract will likely test pressure above from the five and 10- day moving averages.  

Aluminium: The most-liquid SHFE contract shifted to the September contract, from the August contract, which rose to a session high of 14,515 yuan/mt and ended the day 0.14% higher at 14,440 yuan/mt. Low inventories of domestic primary aluminium will support prices. 

Zinc: The most-active SHFE September contract trimmed gains after loaded-up longs sent it to a session high of 18,220 yuan/mt. It closed the day at 18,130 yuan/mt, up 0.39% on the day. Domestic social inventories of zinc continued to fall as it requires time for smelters to ramp up capacity. The contract may extend its rangebound trend tonight. 

Nickel: The most-traded SHFE October contract climbed above 110,000 yuan/mt to the highest level in more than six months, at 110,810 yuan/mt, before it pared some gains and closed at 110,140 yuan/mt, up 2.04% on the day. Open interest surged 29,002 lots to 147,737 lots, driven by a buildup of long positions. The reopening of nickel mining companies in the Philippines will unlikely reverse nickel ore shortage in China, and this supported prices. Pressure above from 110,000 yuan/mt will be monitored tonight. 

Lead: The most-active SHFE September contract climbed amid a broad rally in base metals, rising to an intraday high of 15,260 yuan/mt and closing the day 1.54% higher at 15,160 yuan/mt. Technical indicators turned positive and fundamentals improved amid a decline in domestic lead ingot inventories and tight supply in some areas. A traditional peak consumption season has not arrived. Tonight, the contract is expected to test support from the five- and 10- day moving averages. 

Tin: The most-liquid SHFE October contract traded robustly today as it extended increase from last Friday night, surged to the highest level this year at 147,090 yuan/mt and finished up 2.83% on the day at 146,790 yuan/mt. Open interest increased 8,584 lots to 18,141 lots. Pressure above from the Bollinger upper band will be watched tonight.