SMM Morning Comments (Aug 19): Shanghai base metals traded higher for the most part as investors await FOMC meeting minutes

SHANGHAI, Aug 19 (SMM) — Shanghai base metals broadly increased as of 10:20 Beijing time on Wednesday morning, while their counterparts on the LME were mixed as investors await meeting minutes of the Federal Open Market Committee (FOMC).

The American Petroleum Institute (API) reported early this morning that US crude inventories shrank 4.26 million barrels to about 512 million barrels in the week ended August 14, while gasoline supply surged 4.99 million barrels. 

Nonferrous metals on the LME firmed across the board on Tuesday. Copper jumped 2.33%, aluminium added 0.91%, zinc rose 1%, lead gained 1.53%, nickel advanced 0.75% and tin strengthened 0.92%.

On the SHFE, base metals, except for lead, closed higher in overnight trading. Copper rose 1.69%, aluminum added 0.55%, zinc advanced 0.3%, nickel strengthened 0.57% and tin firmed 0.32%, while lead declined 0.37%. 

Copper: Three-month LME copper jumped 2.33% to end at $6,599/mt on Tuesday. It is likely to trade between $6,550-6,610/mt today.

The most-active SHFE 2009 copper contract settled 1.69% higher at 51,890 yuan/mt in overnight trading. It is expected to move between 51,800-52,200 yuan/mt today, while spot premiums are seen at 70-100 yuan/mt.

Copper prices jumped as the US dollar index fell for five straight days to record a new two-year low of 92.12 on Tuesday amid the ongoing effects of the Federal Reserve’s stimulus programs, and as China’s central bank injected liquidity into the market. However, the Trump administration tightened restrictions on China’s telecommunications giant Huawei and the US coronavirus relief package talks remained in a deadlock, which may weigh on copper prices.

Aluminium: Three-month LME aluminium trended higher on Tuesday, closing 0.91% firmer at $1,773/mt. Open interest fell 10,706 lots to 797,000 lots. It is expected to move between $1,750-1,780/mt today.

The most-liquid SHFE 2009 aluminium contract ended 0.55% higher at 14,505 yuan/mt in overnight trading. It is likely to trade between 14,450-14,700 yuan/mt today, while spot premiums are seen lower at 70-90 yuan/mt.

Zinc: Three-month LME zinc rose 1% to close at $2,474.5/mt in choppy trading. Zinc stocks across LME warehouses expanded 4,625 mt or 2.1% to 224,750 mt. Weak US dollar, the S&P 500 index which rose to its highest level ever on Tuesday and optimism over the coronavirus vaccine bolstered market sentiment. LME zinc is expected to move between $2,440-2,490/mt today.  

The most-traded SHFE 2009 zinc contract settled 0.3% firmer at 19,965 yuan/mt in overnight trading. China’s central bank injected 700 billion yuan of MLF loans into the market, galvanising orders from electric power and steel tower remained robust and domestic orders of die-cast zinc alloy improved slightly. These will bolster SHFE zinc in the short term. The September contract is likely to trade between 19,600-20,100 yuan/mt today, while spot premiums for domestic 0# Shuangyan are seen lower at 110-130 yuan/mt.

Nickel: The most-active SHFE 2010 nickel contract climbed to a fresh high of 117,440 yuan/mt since this year, but later plunged to a low of 115,800 yuan/mt, before wiping out some losses to settle 0.57% firmer at 116,750 yuan/mt in overnight trading.

Lead: Three-month LME lead added 1.53% to finish the day at $1,995/mt.

The most-active SHFE 2009 lead contract opened at a session high of 16,330 yuan/mt in overnight trading, but fell rapidly to a session low 16,050 yuan/mt before rebounding to close 0.37% lower at 16,100 yuan/mt.  

Tin: Three-month LME tin bounced back from an intraday low of $17,265/mt to finish the day 0.92% higher at $17,645/mt. Pressure above will be seen at around the 20-day moving average of $17,752/mt today.

The most-liquid SHFE 2010 tin contract came off a session high of 143,400 yuan/mt to a session low of 142,200 yuan/mt before regaining some ground to close 0.32% firmer at 143,100 yuan/mt in overnight trading. Pressure above will be seen at 144,300 yuan/mt today.