SMM Morning Comments (Jul 22): Shanghai base metals were mostly higher on strong earnings

SHANGHAI, Jul 22 (SMM) — Shanghai base metals were mostly higher on Thursday morning as investors tracked another batch of quarterly earnings and shrugged off Covid-19 fears. Meanwhile, their counterparts on the LME also rose for the most part.

Shanghai base metals were mostly higher in overnight trading. Copper rose 0.38%, aluminium added 0.68%, nickel was 0.21% higher, lead advanced 0.82%. Tin went down by 0.49% while zinc fell by 0.87%.

The LME complex saw a mixed performance on Wednesday. Copper added 0.15%, aluminium rose 0.39%, lead went up by 0.69%. On the other hand, nickel fell by 0.32%, tin went down 0.27% and zinc weakened by 0.74%.

Copper: Three-month LME copper rose 0.15% to end at $9,356.5/mt on Wednesday, and is likely to trade between $9,320-9,400/mt today.

The most-active SHFE 2108 copper contract went up 0.38% to close at 68,450 yuan/mt in overnight trading, and it is expected to move between 68,200-68,800 yuan/mt today, while spot discounts will be seen at 280–380 yuan/mt.

Domestic official announced yesterday that the second batch of 30,000 mt of national reserve copper would be released in late July. After the announcement, copper prices rose slightly at night as the quantity of copper reserves was less than the market expectation. However, with the continuous spread of Delta variant virus recently, the market is worried that more travel restrictions will be introduced, which will weaken economic activities. Cautious market sentiment will give upward pressure, and copper futures will continue to fluctuate. With the influence of domestic smelters' maintenance weakening and the import copper gradually flowing into the market, the supply side tends to be loose. With the arrival of the traditional off-season, copper consumption in the market is sluggish, and the fundamentals have limited support for copper prices. Recently, there is still a lack of obvious macro direction, and the market is still paying attention to the Fed meeting on interest rates and employment data in July, waiting for further macro guidance.

Aluminium: Three-month LME aluminium rose 0.39% to close at $2,457.5/mt on Wednesday.

The most-liquid SHFE 2108 aluminium contract rose 0.68% to settle at 19,165 yuan/mt on Wednesday night.

On fundamentals, the current aluminium consumption shows signs of weakening, but the aluminium ingot inventories are still in the decreasing cycle. Social inventories of aluminum 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. The amount of ingots reserves in the second batch stood at 90,000 mt, which was still lower than the market expectation. Under the stimulation of market sentiment, aluminium prices may rise. It is necessary to pay continuous attention to the impact of power curtailment on both ends of supply and demand, flood development in Henan Province, inventory inflection point, and changes in sentiment of long and short positions.

Zinc: Three-month LME zinc fell 0.74% to close at $2,939.5/mt on Wednesday. Zinc stocks at LME-listed warehouses fell 250 mt to 247,625 mt. Risk aversion in the market has increased amid the pandemic situation overseas and inflation expectations and LME zinc is likely to trend lower under market pressure. The contract is likely to trade between $2,920-2,970/mt today.

The most-liquid SHFE 2108 zinc contract fell 0.87% to end at 22,145 yuan/mt in overnight trading. The state announced yesterday that it would sell 50,000 mt of zinc publicly in late July, which released the policy signal that the state carried out the policy of guaranteeing the price and stabilising the supply of bulk commodities, and SHFE zinc immediately dropped. However, low inventories still supported zinc prices, and the increase of inventories will be monitored in the near term. The SHFE zinc contract is expected to move between 22,000-22,500 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be 170-180 yuan/mt.

Nickel: LME Nickel fell 0.32% to $18,605/mt on Wednesday night. The most-liquid SHFE 2108 nickel contract rose 0.49% to close at 138,430 yuan/mt on Wednesday night.

Lead: Three-month LME lead settled 0.69% higher at $2,346/mt on Wednesday. Whether the contract could maintain its upward trend and stand firm above $2,350/mt will be monitored today.

The most-active SHFE 2109 lead contract went up 0.41% to close at 15,895 yuan/mt on Wednesday night. Whether the contract could move above 16,000 yuan/mt will be monitored today.

Tin: LME Nickel fell 0.32% to $18,605/mt on Wednesday night. The most-liquid SHFE 2108 nickel contract rose 0.49% to close at 138,430 yuan/mt on Wednesday night. The contract is expected to fluctuate between 223,500-227,500 yuan/mt.