SMM Morning Comments (Aug 18): Shanghai base metals rose for the most part as PBOC injected 700 billion yuan of MLF loans

SHANGHAI, Aug 18 (SMM) —Shanghai base metals were broadly higher as of 10:16 Beijing time on Tuesday morning as the People's Bank of China (PBOC) injected 700 billion yuan of MLF loans into the market, while nonferrous metals on the LME were mixed as investors continued to eye developments in US-China tensions.

Shanghai base metals, except for tin, moved higher on overnight trading. Copper rose 1.27%, aluminium added 0.42%, zinc jumped 2.13%, lead advanced 0.37% and nickel increased 1.12%, while tin weakened 0.18%.

Their counterparts on the LME performed similarly. Copper increased 1.31%, aluminium strengthened 0.92%, zinc soared 3.38%, lead added 0.77% and nickel rose 1.77%, while tin fell 0.91%.

Copper: Three-month LME copper trended higher on Monday and added 1.31% to settle at $6,449/mt. It is likely to trade between $6,430-6,500/mt today.

The most-traded SHFE 2009 contract closed 1.27% firmer at 51,030 yuan/mt in overnight trading. China’s central bank injected 700 billion yuan of medium-term lending facility (MLF) loans into the market, easing concerns on tightened liquidity. Improved risk appetite underpinned copper prices. Domestic spot copper supply remained tight despite inflow of imported copper, which prompted traders to raise prices. The September copper contract is expected to move between 50,800-51,500 yuan/mt today, while spot premiums are seen at 60-110 yuan/mt.  

Aluminium: Three-month LME aluminium closed 0.92% firmer at $1,757/mt on Monday. Open interest fell 1,440 lots to 807,000 lots. It is likely to move between $1,735-1,765/mt today.  

The most-active SHFE 2009 aluminium contract advanced 0.42% to close at 14,395 yuan/mt in overnight trading. The August contract expired on Monday, with total delivery of 61,300 mt. The September contract is likely to move between 14,250-14,550 yuan/mt today, while spot premiums are seen higher at 100-120 yuan/mt.

Zinc: Three-month LME zinc trended higher on Monday, soaring 3.38% to close at an intraday high of $2,450/mt. Zinc stocks across LME warehouses expanded 6,175 mt to 220,125 mt. Weak US dollar, fiscal stimulus, lax monetary policy and US coronavirus pandemic showing signs of easing boosted market sentiment. LME zinc is expected to move between $2,410-2,460/mt today.  

The most-traded SHFE 2009 zinc contract jumped 2.13% to end at 19,940 yuan/mt in overnight trading. Zinc social inventories extended declines amid optimism over end-user consumption, and this, coupled with China central bank injecting 700 billion yuan of MLF loans, bolstered market sentiment. The September contract is expected to trade between 19,500-20,000 yuan/mt today, while spot premiums for domestic 0# Shuangyan are seen slightly higher at 140-150 yuan/mt.

Nickel: Three-month LME nickel hit a new annual high of $14,700/mt on Monday and closed 1.77% firmer.  

The most-liquid SHFE 2010 nickel contract rose 1.12% to end at 116,150 yuan/mt in overnight trading, but it failed to touch the high hit in the previous session as some major longs continued to shift to the November contract. Nickel prices are expected to remain high today.

Lead: Three-month LME lead hit a session high of $1,978/mt before erasing some gains and finishing the day 0.77% higher at $1,965/mt.

The most-active SHFE lead contract settled 0.37% higher at 16,220 yuan/mt in overnight trading. It is likely to move higher as domestic currency liquidity strengthened.

Tin: Three-month LME tin plunged to the lowest level since mid-July of $16,795/mt before regaining some ground and finishing the day 0.91% lower at $17,485/mt on Monday. Support below is seen at around $17,390/mt today.

The most-active SHFE 2010 tin contract came off a session high of 143,320 yuan/mt to close 0.18% weaker at 142,330 yuan/mt in overnight trading. Support below is seen at around 141,500 yuan/mt today.