SMM Evening Comments (Jun 18): SHFE base metals closed mostly higher on lingering recovery hopes

SHANGHAI, Jun 18 (SMM) – SHFE nonferrous metals strengthened for the most part on Thursday, as lingering optimism over economic reopening outweighed concerns over a rise in coronavirus cases.

Lead advanced 1.3% to be the biggest gainer, zinc rose 0.7%, tin climbed 0.4% and copper added 0.3%, while nickel stayed flat. Aluminium retreated 0.4%.

For copper, aluminium and zinc, their contracts for August delivery overtook the July ones became the most actively traded.

On the LME, base metals rose across the board as of 18:17 Beijing time, as oil prices resumed their rally.

A Chinese Centers for Disease Control and Prevention expert said at a news conference Thursday that a coronavirus outbreak in Beijing, which saw 21 new cases confirmed on Wednesday and 31 the day before, was now under control.

US jobless claims data is set to come out tonight, offering an update on the pace of the labor market’s recovery from the pandemic. Economist polled by Dow Jones expected a total of 1.30 million new filings for the week ending June 13, a decline from 1.54 million from the week prior.

Copper: The most traded contract for August delivery on the SHFE hovered in a tight range around the upper Bollinger band during the daytime session, holding onto overnight gains to close 0.26% higher at 46,760 yuan/mt. Its discount against the July contract came in at 160 yuan/mt, with little change to fundamentals which remain positive. With support at the five-day moving average, the contract is likely to try to break above the 47,000 mark.

Aluminium: The most liquid SHFE contract for August delivery moved in a tight range during the daytime session, failing to recover from overnight losses to close 0.4% lower at 13,555 yuan/mt, as SMM data showed that social inventories of primary aluminium ingots in China registered a much smaller decline this week. Fears of an end to the inventory decline amid the influx of imported cargoes and the release of invisible stockpiles, will limit upside in SHFE aluminium, deterring it from crossing the 14,000 mark.

Zinc: The most active contract on the SHFE for August delivery traded in a small range of 50 yuan/mt during the daytime session, and held onto overnight gains to close 0.73% higher at 16,625 yuan/mt. It is unlikely to stage a substantial pullback tonight, as market optimism stemming from slow mine resumption outweighs fears of a second wave of coronavirus outbreaks.

Nickel: The most traded SHFE contract for August delivery recovered from earlier losses to close flat at 103,250 yuan/mt, as longs and shorts diverged. It is expected to remain between the upper and middle Bollinger bands tonight.

The market has barely reacted to the implementation of Indonesia’s revised mining law on June 17. The new law allows miners building smelters to export ore for the next three years, but stipulates that the government can rule against the export of specific ores under a separate regulation.

Lead: The most active SHFE July contract advanced 1.26% to end at 14,485 yuan/mt, after hitting a two-week peak of 14,500 yuan/mt earlier in the session. It is likely to remain firm tonight if its LME counterpart extends its gains.

Tin: Longs lifted the most active SHFE August contract during the daytime session, which closed 0.38% higher at 138,490 yuan/mt after hovering in a tight range around the flatline in overnight trading. Pressure is seen at a previous high of 139,500.