SMM Evening Comments (Jul 16): Shanghai base metals fell across the board for two days, investors mulled China data

SHANGHAI, Jul 16 (SMM) – SHFE nonferrous metals fell across the board for the second consecutive day on Thursday July 16, as concerns over rising coronavirus cases and US-China tensions tempered optimism over a coronavirus vaccine.

Aluminium led the losses and slumped 3.52%, copper slipped 3.4%, zinc eased 1.09%, lead lost 3.12%, tin went down 1.74% and nickel decreased 2.32%.

The ferrous complex also traded lower for the most part. Iron ore retreated 0.84%, rebar shed 0.96%, hot-rolled coil fell 0.77%, stainless steel declined 1.51% while coke edged up 0.05%.

Investors mulled figures showing China’s economy returned to growth in the last quarter. Official data showed that China’s GDP grew by 3.2% in Q2 this year, compared to a year ago — beating analysts’ expectations and rebounding from the Q1 contraction.

Copper: The most-traded SHFE September contract extended its decline from the previous two days, as rising US-China tensions kept investors cautious about a quick economic recovery amid the pandemic. The contract slipped to an intraday low of 50,580 yuan/mt and closed 3.4% lower on the day at 50,710 yuan/mt. It hovered below the daily moving average and it remains to be seen whether it could return above 51,000 yuan/mt tonight. 

Aluminium: The most-liquid SHFE August contract pulled back for the third consecutive day as departing longs sent it to a session low of 13,960 yuan/mt, before it finished the day at 13,975 yuan/mt, down 3.52% on the day. That marked the biggest drop since April. Open interest shrank 7,090 lots to 399,562 lots. Low inventories of primary aluminium in China will underpin near-term aluminium prices. 

SMM data showed that primary aluminium ingot inventories in China extended a downward trend this week, albeit at a slower pace. Inventories of aluminium billet in China have declined for the second consecutive week as of July 16 as arrivals were limited and deliveries remained at high levels. 

Zinc: The most-active SHFE September contract traded weakly and hit a session low of 17,555 yuan/mt as investors covered their longs following a plunge in China’s stock market. It finished down 1.09% on the day at 17,675 yuan/mt, with open interest down 4,698 lots to 82,926 lots. The contract will likely extend its weak trend tonight. 

Nickel: The most-traded SHFE October contract traded lower amid a board decline in base metals, It dipped to a session low of 105,200 yuan/mt, close to the 20-day moving average, before it trimmed some losses and ended at 106,170 yuan/mt, down 2.32% on the day. Support below is seen from the 20-day moving average tonight. 

Lead: The most-active SHFE August contract came down after it edged up to a session high of 15,175 yuan/mt in early trades. It closed the day 3.12% lower at 14,890 yuan/mt. It has broken down the five- and 10- day moving averages, and support from the 10-day moving average will be monitored tonight. 

Tin: The most-liquid SHFE contract finished 1.74% lower on the day at 139,920 yuan/mt, following an intraday low of 139,070 yuan/mt. Support below is expected from the 20-day moving average, or 139,500 yuan/mt.