SMM Morning Comments (Jul 21): Shanghai base metals rose across the board following Wall Street rebound

SHANGHAI, Jul 21 (SMM) — Shanghai base metals were mostly higher on Wednesday morning, recovering from a sharp sell-off in the previous session on fears of a Covid-19 resurgence. Meanwhile, their counterparts on the LME fell for the most part.

Shanghai base metals all closed higher in overnight trading. Copper rose 0.87%, zinc increased 0.09%, aluminium added 0.74%, nickel jumped 0.31%, lead advanced 1.28% and tin went up 0.19%.

The LME complex performed similarly on Tuesday. Copper added 1.62%, aluminium rose 1.16%, tin increased 0.96%, lead went up 1.86%, zinc advanced 0.14% and nickel strengthened 1.55%.

Copper: Three-month LME copper rose 1.62% to end at $9,342.5/mt on Tuesday, and is likely to trade between $9,300-9,380/mt today.

The most-active SHFE 2108 copper contract went up 0.87% to close at 68,500 yuan/mt in overnight trading, and it is expected to move between 68,300-68,900 yuan/mt today, while spot premiums will be seen at 320-400 yuan/mt.

US announced last night that the number of new housing starts in June exceeded expectations and rose to a three-month high. Yesterday, US stocks fluctuated, and investors purchased at low prices in the market. The stock index hit the biggest increase since March. The S&P 500 index almost recovered all lost ground on Monday. Recently, the fear that the rebound of pandemic situation will hinder economic recovery has eased, and the focus of overnight copper futures has risen.

Aluminium: Three-month LME aluminium rose 1.16% to close at $2,448/mt on Tuesday.

The most-liquid SHFE 2108 aluminium contract rose 0.74% to settle at 19,185 yuan/mt on Tuesday night.

Overnight, the US dollar index hit a new high since April, and nonferrous metals were under pressure collectively. On fundamentals, the current aluminium consumption shows signs of weakening, while the aluminium ingot inventory is still in the decreasing cycle. Social inventories of aluminium ingots decreased slightly by 3,000 mt to 829,000 mt on Monday compared with last Thursday, and the narrowing of the decline will exert certain pressure on aluminium prices. It is necessary to pay continuous attention to whether the second batch of reserve is intensified, the impact of power curtailments on both ends of supply and demand, the flood development in Henan, whether the inflection point of inventory changes, and the sentiment changes of long and short positions.

Zinc: Three-month LME zinc rose 0.14% to close at $2,961.5/mt on Tuesday. Zinc stocks at LME-listed warehouses continued to decrease. The increase of new housing starts in the US in June was higher than expected, and the market speculated that the Federal Reserve would continue to support economic development through ultra-low interest rates when the global pandemic came back. It is expected that zinc prices will still fluctuate strongly in the near term. The contract is likely to trade between $2,940-2,990/mt today.

The most-liquid SHFE 2108 zinc contract rose 0.09% to end at 22,500 yuan/mt in overnight trading. Zinc prices continued to fluctuate at a high level. Low inventories on the fundamentals and the lower-than-expected imports of zinc concentrates and ingots in June still supported zinc prices, but the expected reserves limited its increase. The SHFE zinc contract is expected to move between 22,200-22,700 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be 170-180 yuan/mt.

Lead: Three-month LME lead settled 1.86% higher at $2,330/mt on Tuesday. Whether the contract could maintain its upward trend and move above $2,350/mt will be monitored today.

The most-active SHFE 2109 lead contract went up 1.08% to close at 15,875 yuan/mt on Tuesday night. The contract will test pressure from 15,900 yuan/mt today.

Tin: The most-liquid SHFE 2108 tin contract rose 0.19% to close at 228,490 yuan/mt on Tuesday night. It is expected to trade between 226,000-231,000 yuan/mt.