SMM Morning Comments (Jul 30): Shanghai base metals mostly higher after Fed kept rates unchanged

SHANGHAI, Jul 30 (SMM) – SHFE nonferrous metals, except for copper, cruised higher on Thursday morning, extending overnight gains, as the US Federal Reserve kept its interest rates unchanged at near zero.

In overnight trading, SHFE nonferrous metals strengthened for the most part. Copper gained 0.5%, aluminium advanced 1.4%, zinc surged 2.2%, lead increased 0.8%, nickel rose 1.1%, while tin dropped 1.1%. 

On Wednesday, LME nonferrous metals, except for tin, moved higher. Copper and aluminium edged up 0.1%, zinc jumped 1.5%, nickel surged 1.6% and lead rose 0.9%.

The US dollar index dipped to a two-year low of 93.17 as the Fed held interest rates steady.

The Fed kept its rate targeted in a range between 0%-0.25% in a decision announced Wednesday that came along with a tepid outlook on the coronavirus-plagued economy. In a move widely expected, the US central bank kept its benchmark overnight lending rate anchored near zero, where it has been since March 15 in the early days of the pandemic.

Copper: Three-month LME copper firmed 0.11% to $6,476/mt in choppy trading on Wedneaday. It is expected to trade between $6,480-6,540/mt today.

The most-active SHFE September contract closed 0.46% higher at 52,010 yuan/mt in overnight trading. It is likely to move between 51,900-52,300 yuan/mt today. Spot premiums are seen stable at 30-90 yuan/mt. Spot gold prices and most of the base metals moved higher as the Fed kept rates on hold. Improved market sentiment will support copper prices.

Aluminium: Three-month LME aluminium recouped earlier losses and ended a tad firmer at $1,727.5/mt on Wednesday, after hitting a new five-month high of 1,730 earlier in the session. Open interest for the contract shrank to 794,000 lots. It is likely to move between $1,710-1,750/mt today.

The SHFE September contract jumped to a two-week high of 14,680 yuan/mt before closing 1.35% higher at 14,655 in overnight trading. Open interest increased sharply over the past two trading days, suggesting that funds returned to the market amid postive macro sentiment and low inventories. The contract is expected to trade between 14,400-14,800 yuan/mt today.

Zinc: Three-month LME zinc rose 1.54% to end at $2,302/mt on Wednesday, after hitting a six-month high of 2,307 earlier in the session. The prices registered three consecutive days of substantial gains despite continued increases in inventories. Data showed that zinc stocks across LME warehouses increased sharply for another day on Wednesday, jumping 8.37%, or 14,475 mt to 187,475 mt. LME zinc is expected to trade between $2,270-2,320/mt today.

The most-active SHFE September contract jumped 2.2% to 18,780 yuan/mt in overnight trading, after earlier scaling 18,895, its highest in eight months. The contract is expected to move between 18,500-19,000 yuan/mt today, while spot premiums for domestic 0# Shuangyan are seen slightly higher at 90-100 yuan/mt over the August contract.

Nickel: Three-month LME nickel was on a tear on Wednesday, climbing 1.61% to end at an intraday high of $13,920/mt, within striking distance of a five-month peak of 13,995 notched in the previous session. Whether it could break above the 14,000 mark will come under scrutiny today.

The most-active SHFE October contract strengthened 1.1% to 110,740 yuan/mt in overnight trading. It remains above the five-day moving average and pressure at 111,500 will come under scrutiny today.

Lead: Three-month LME lead rose 0.91% to end at a new two-week peak of $1,878/mt on Wednesday. It is likely to extend its rally in the short term, given positive technical indicators.

The most-active SHFE September contract strengthened 0.84% to close at 15,605 yuan/mt in overnight trading. Improving fundamentals and tight spot supplies will keep the contract moving at high levels.

Tin: Three-month LME tin weakened 0.36% to $17,960/mt in choppy trading on Wednesday, coming off one-year highs. It is still supported by the five-day moving average at 179,000.

The SHFE October contract shed 1.08% to end at 146,800 yuan/mt in overnight trading. It still resides above the five-60 day moving averages and faces pressure at 148,000.