SMM Morning Comments (Apr 30): Shanghai base metals performance mixed as investors turned cautious

SHANGHAI, Apr 30 (SMM) — Shanghai base metals traded mixed on Friday morning as markets reacted to the US Federal Reserve's decision to hold interest rates near zero and digested a fresh round of corporate earnings. Meanwhile, their counterparts on the LME also set for a mixed start.

Shanghai base metals closed mixed in overnight trading. Nickel slid 0.61%, zinc declined 1.55% and copper weakened 0.58%, while aluminium climbed 0.69%, tin rose 0.22% and lead increased 0.07%.

The LME complex performed similarly on Thursday. Lead was the best performer with a rise of 0.86%. Aluminium advanced 0.56% and copper edged up 0.05%, while nickel slid 0.6%, tin declined 0.32% and zinc weakened 0.48%.

Copper: Three-month LME copper rose 0.05% to end at $9,861/mt on Thursday, and is likely to trade between $9,810-9,900/mt today.

The most-active SHFE 2106 copper contract went down 0.65% to close at 71,910 yuan/mt in overnight trading, and it is expected to move between 71,600-72,200 yuan/mt today, while spot discounts will be seen at 200-70 yuan/mt.

The number of US initial jobless claims announced last night recorded 553,000, slightly higher than the previous value. The annualised quarterly rate of real GDP in the first quarter of the US stood at 6.40%, which was 0.2 percentage point lower than the expected value, while still significantly better than the previous value. The US economic data is improving, and optimistic market sentiment makes LME copper break through the $10,000 mark at night, while most investors took profits, and then the contract declined. The guidance of China's official manufacturing PMI data for the market in April will be monitored today. On the spot side, the attraction of large discounts to trade buying kept the market active, while traders' buying with a leading role was difficult to form popularisation before the holiday.

Aluminium: Three-month LME aluminium rose 0.56% to close at $2,413.5/mt on Thursday. LME aluminium stocks increased 56,350 mt, Klang inventory surged by 61,150 mt, and the upward pressure appeared. It is expected to trade between $2,400-2,430/mt today.

The most-liquid SHFE 2106 aluminium contract rose 0.69% to settle at 18,870 yuan/mt on Thursday night, and is likely to trade between 18,700-19,000 yuan/mt today. Approaching May Day holiday, there is a pre-holiday stockpiling demand in the downstream, and domestic social stocks of aluminium ingots continued to decline sharply, which supported aluminium prices to some extent. It is expected that the contract will maintain a narrow fluctuation trend today.

Zinc: Three-month LME zinc fell 0.48% to close at $2,912/mt on Thursday. Zinc stocks at LME-listed warehouses remained unchanged at 291,950 mt. The US dollar rebounded at a low level, and the monthly rate of US Pending Home Sales Index in March was less than expected, which suppressed the trend of LME zinc. However, the strong economic data in the US and the new low number of initial jobless claims may limit the downside space of LME zinc. The contract is likely to trade between $2,900-2,950/mt today.

The most-liquid SHFE 2106 zinc contract rose 1.55% to end at 21,930 yuan/mt in overnight trading. As China approaches the May Day holiday, long position funds have left the market one after another. On the spot side, zinc prices fluctuated at a high level, and the downstream restocking mood was sluggish, and the enterprises had more holidays during the May Day holiday, which further dragged down the consumption of zinc market. However, considering that the macro sentiment is still warm, zinc prices are likely to keep fluctuating at a high level in the near term. The SHFE zinc contract is expected to move between 21,800-22,300 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen higher at 20-30 yuan/mt.

Nickel: The most-active SHFE 2106 nickel contract fell 0.61% to close at 128,700 yuan/mt on Thursday. Open interests fell 7,952 lots to 144,000 lots. There is only one trading day before the holiday, and the operation of funds is relatively cautious.

Lead: Three-month LME lead settled 0.86% higher at $2,113/mt on Thursday. LME lead stocks continued to decline slightly. Whether the contract could stand firm above $2,100/mt will be monitored today.

The most-active SHFE 2106 lead contract went up 0.07% to close at 15,305 yuan/mt on Thursday night. The contract will test support from 10-day moving average today.

Tin: Three-month LME tin closed down 0.32% at $28,200/mt on Thursday. LME spot premiums for March contracts rose again to $2,590/mt yesterday. LME tin stocks remained at 1,305 mt, indicating that the shortage of overseas tin supply intensified. The US dollar index rebounded from a nine-week low on Thursday, boosted by the rising yield of US government bonds, after the government announced that the economy grew strongly in the first quarter and the number of initial jobless claims fell last week. US benchmark 10-year bond yield rose by 2 basis points to 1.639% on Thursday, boosted by optimistic economic report. The tight supply in the overseas tin market and the weak US dollar support the rising trend of LME tin. The contract is expected to trade mainly on the strong side. Pressure above will be seen from $29,000 /mt today. Support below will be seen from $27,000/mt today.

The most-liquid SHFE 2106 tin contract fell 0.45% to end at 191,280 yuan/mt on Thursday night. The continuous upward movement of LME tin supports the trend of SHFE tin. The guidance of LME tin on the trend of domestic tin prices should be monitored in the near term. Pressure above will be seen from 193,000 yuan/mt today. Support below will be seen from 186,000 yuan/mt today.