SMM Morning Comments (May 19): Base metals mostly higher in volatile trading

SHANGHAI, May 19 (SMM) – Nonferrous metals were higher for the most part in volatile trading on Tuesday morning as oil prices reversed earlier gains to move lower.

On the LME, copper, aluminium, nickel, tin and lead were in positive territory as of 9:57 a.m. Beijing time while zinc has slipped into negative territory. The six nonferrous metals moved sharply higher across the board on Monday, as oil prices jumped. Lead surged close to 3.8% to be the best performer. Nickel jumped 3.7%, copper advanced 3.1%, aluminium and zinc climbed 2.7%, and tin rose 1.8%.

Meanwhile, those nonferrous metals on the SHFE were broadly higher on the day, thanks to overnight gains. In overnight trading, SHFE base metals continued their rebound from the previous session, and nickel surged 2.5% to lead the way up. Zinc jumped 1.9%, tin rose 1.7%, copper gained 1.6%, lead climbed 1.5% and aluminium was up 1.4%.

Earlier, crude prices jumped, following Monday’s sharp gains, which boosted base metals. Oil prices rose substantially on Monday, supported by production cuts and the easing of stay-at-home restrictions, while US stocks scored its best day in six weeks on rising optimism about a coronavirus vaccine.

Copper: Three-month LME copper crept up 3.1% to $5,345.5/mt on Monday, its highest in a week, while the most active SHFE June contract advanced 1.6% to 43,750 yuan/mt in overnight trading.

Aluminium: Three-month LME aluminium advanced 2.74% to a one-week peak of $1,500/mt on Monday, and is expected to move to $1,480-1,520/mt today.

The most active SHFE July contract notched a two-month peak of 12,920 yuan/mt in overnight trading, before closing up 1.42% at 12,865 yuan/mt. With wider discounts against the June contract and firm spot premiums, the July contract is expected to move at 12,700-13,000 yuan/mt today.

Zinc: Three-month LME zinc climbed to a high of $2,028/mt on Monday, shortly before ending up 2.7% at $2,019/mt, nearing the upper Bollinger band. Data showed that zinc stocks at LME-approved warehouses extended their decline, dipping 350 mt to 98,625 mt as of May 18. The contract is expected to move at $2,000-2,050/mt today.

The most-liquid SHFE July contract scaled its highest since May 12 at 16,895 yuan/mt in overnight trading, before closing up 1.9% at 16,870 yuan/mt. It is likely to continue to test the upper Bollinger band and move at 16,500-17,000 yuan/mt today, while spot premiums for domestic 0# Shuangyan are likely to expand to 140-160 yuan/mt over the SHFE June contract.

Nickel: Three-month LME nickel surged 3.72% to $12,260/mt on Monday, returning above 5-60 moving averages. Whether it could remain above $12,200/mt will come under scrutiny.

The most-traded SHFE July contract hit a one-week high of 101,950 yuan/mt in overnight trading, before closing up 2.46% at 101,530 yuan/mt. Whether it could shrug off pressure at the 102,000 mark will come under scrutiny.

Lead: Three-month LME lead climbed to a high of $1,672.5/mt on Monday, shortly before it closed up 3.84% at $1,662.5/mt.

The most-liquid SHFE June contract rose to a high of 14,185 yuan/mt in overnight trading, before it ended up 1.47% at 14,125 yuan/mt, on track for a third straight day of gains.

Tin: Three-month LME tin rose to a high of $15,315/mt on Monday, before finishing the day 1.8% higher at $15,235/mt. Resistance is seen at the 60-day moving average at $15,300/mt.

The most-traded SHFE July contract fluctuated in overnight trading, holding onto gains from a higher open to end up 1.67% at 131,080 yuan/mt. Resistance is seen at 132,000 yuan/mt, while support is at the 20-day moving average at 128,000 yuan/mt.