SMM Evening Comments (May 25): Shanghai base metals mixed as investors eyed US-China tension

SHANGHAI, May 25 (SMM) – SHFE nonferrous metals closed mixed on Monday May 25, following a broad decline last Friday, as escalating tension between China and the US weighed on optimism around economic reopening from the coronavirus lockdowns. 

Nickel extended its decline and led the losses with a drop of 2.01%. Copper shed 0.18%, zinc fell 0.18%, while aluminium gained 0.31%, lead rose 1.7% and tin added 0.01%. 

The ferrous complex mostly ended lower as iron ore eased 0.21%, rebar and hot-rolled coil fell 1.33%, and stainless steel dipped 0.6%. Coke, meanwhile, advanced 2.27% on the back of increased demand from steelmaking and environmental production curbs in Shandong province. 

The LME is closed on Monday for a bank holiday.

Crude oil futures started the trading week on a high note, continuing its recovery as US supply continued to decline. 

Copper: The most-traded SHFE July contract pared some declines from last Friday as it climbed with loading-up longs, but cautious sentiment around the US-China tension bolstered risk aversion and sent the contract 0.18% lower on the day, at 43,650 yuan/mt. With pressure above from the five-day moving average, the contract will likely hover above 43,000 yuan/mt tonight. 

Aluminium: The most-liquid SHFE July contract halted its increase at 12,890 yuan/mt and trimmed some gains to close the day at 12,840 yuan/mt, up 0.31% on the day. Continued fast declines in domestic inventories will cap any downsides in prices. SMM data showed that social inventories of primary aluminium ingots across eight consumption areas in China, including SHFE warrants, decreased 55,000 mt from last Thursday May 21 to 924,000 mt as of Monday May 25.

Zinc: The most-active SHFE July contract rebounded after slipped to an intraday low of 16,170 yuan/mt, stabilising around the daily moving average and ending the day 0.18% lower at 16,330 yuan/mt. It is expected to move sideways around the 20-day moving average tonight. SMM data showed that social inventories of refined zinc ingots across Shanghai, Tianjin, Guangdong, Jiangsu, Zhejiang, Shandong and Hebei decreased 3,600 mt from last Friday May 22 to 222,100 mt as of Monday May 25.

Lead: The most-active SHFE July contract rallied today with the buoyance from bullish positions, rising to a session high of 14,430 yuan/mt and ending the day 1.7% higher at 14,350 yuan/mt. There is further upward potential in the contract tonight, but support from fundamentals remains limited. 

Tin: The most-liquid SHFE July contract came off after climbing to an intraday high of 134,600 yuan/mt, finishing the day 0.01% higher at 133,360 yuan/mt. Open interest shrank 1,992 lots to 26,195 lots as both longs and shorts exited. Pressure above is seen from 136,000 yuan/mt with support expected from 129,000-130,000 yuan/mt tonight.