SMM Morning Comments (Jul 23): Shanghai base metals were mostly higher on dovish ECB comments

SHANGHAI, Jul 23 (SMM) — Shanghai base metals mostly cruised higher on Friday morning amid dovish comments from European Central Bank. Meanwhile, their counterparts on the LME traded mixed.

Shanghai base metals mostly advanced in overnight trading. Lead increased 2.19%, tin rose 2.5%, nickel went up 1.63%, aluminium added 0.94% and copper strengthened 1.25%, while zinc slid 0.11%.

The LME complex performed similarly on Thursday. Aluminium added 0.33%, copper rose 1.1%, tin increased 1.69%, lead went up 1.73% and nickel strengthened 1.42%, while zinc fell 0.17%.

Copper: Three-month LME copper rose 1.1% to end at $9,459.5/mt on Thursday, and is likely to trade between $9,440-9,530/mt today.

The most-active SHFE 2109 copper contract went up 1.24% to close at 69,500 yuan/mt in overnight trading, and it is expected to move between 69,300-69,900 yuan/mt today, while spot premiums will be seen at 280-380 yuan/mt.

It was announced last night that the number of initial jobless claims in the US rose unexpectedly last week, the largest increase since late March, highlighting the turbulent situation in the job market. The market's worries about the Fed's accelerated tightening of liquidity eased, and the risk appetite continued to improve. Yesterday, the three major stock indexes in the US closed up across the board, with oil prices hitting a new high in the week, and the copper futures were boosted and fluctuated higher.

Aluminium: Three-month LME aluminium rose 0.33% to close at $2,465.5/mt on Thursday.

The most-liquid SHFE 2109 aluminium contract rose 0.94% to settle at 19,290 yuan/mt on Thursday 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 aluminium ingots decreased by 23,000 mt on Thursday to 809,000 mt from last Thursday. The second batch of ingots stood at 90,000 mt, which was still lower than the market expectation. Under the stimulation of market sentiment, aluminium prices rose again. It is necessary to pay continuous attention to the impact of power cut on both ends of supply and demand, flood development in Henan Province, inventory inflection point, and changes in sentiment of long and short positions. SMM expects that aluminium prices will fluctuate at a high level in the second half of the year. On the one hand, the annual inventory may remain at a low level to support the bottom of aluminium price, while the cost will continue to play a supporting role. On the other hand, the expectation of overseas interest rate increase and domestic control measures have also suppressed aluminium prices.

Zinc: Three-month LME zinc fell 0.17% to close at $2934.5/mt on Thursday. Zinc stocks at LME-listed warehouses fell 150 mt to 247,475 mt. The number of US jobless claims unexpectedly rose last week, the largest increase since late March, and the optimism of the market was suppressed because of the overseas pandemic. However, the European Central Bank stressed that it would not tighten its policy prematurely and the Federal Reserve's loose monetary policy may continue to limit its decline. The contract is likely to trade between $2,920-2,970/mt today.

The most-liquid SHFE 2109 zinc contract fell 0.14% to end at 22,115 yuan/mt in overnight trading. At present, low inventories still support zinc prices, but the news of the second batch of reserves at present has raised the short position sentiment in the market. The actual inventory changes will be monitored and it is expected that zinc prices will still fluctuate at a high level 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 seen higher at 170-180 yuan/mt.

Lead: Three-month LME lead settled 1.73% higher at $2386.5/mt on Thursday. Whether the contract continue to move above $2,400/mt and set a new high will be monitored tonight.

The most-active SHFE 2109 lead contract went up 1.84% to close at 16,300 yuan/mt on Thursday night. The contract will test pressure from 16,000 yuan/mt today.

Tin: The most-liquid SHFE 2108 tin contract rose 2.5% to end at 231,400 yuan/mt on Thursday night. The contract is expected to fluctuate between 230,000-234,000 yuan/mt.