SMM Morning Comments (Jun 8): Shanghai base metals opened Monday higher after surprise US jobs data

SHANGHAI, Jun 8 (SMM) – SHFE nonferrous metals, except for lead and zinc, traded higher on the morning of Monday June 8, following after they ended mixed last Friday night, as investors risk appetite grew after Friday’s US jobs report bolstered hope of a quick economic rebound.

The US Labor Department said the economy stateside added 2.5 million jobs in May. Economists polled by Dow Jones had forecast a drop of more than 8 million.

SHFE base metals traded mixed on Friday night, as zinc lost 1.72%, lead fell 0.14%, while tin increased 1.5%, copper climbed 1.51%, aluminium advanced 0.91% and nickel gained 0.46%. Stainless steel added 0.58% and rebar grew 0.36%.

LME nonferrous metals closed mostly higher on Friday, with copper leading the gains and increased 2.43%. Tin rose 2.34%, nickel climbed 0.94%, aluminium went up 1.75%, lead expanded 1.27%, while zinc slipped 0.37%.

Crude oil futures extended increases Monday after OPEC and its partners agreed on the weekend to extend the production cuts they implemented in April until at least the end of July.

Copper: Three-month LME copper advanced quickly last Friday amid improved macroeconomic sentiment, ending the day 2,43% higher at $5,659/mt, with the most-liquid SHFE contract closing higher at 45,640 yuan/mt. LME copper is expected to trade at $5,620-5,670/mt today with the most-active SHFE contract at 45,300-45,700 yuan/mt. Spot offers are likely at a discount of 10 yuan/mt to a premium of 20 yuan/mt, underpinned by current low inventories. 

Aluminium: Three-month LME aluminium traded robustly with the support from longs, rising with the five- and 10- day moving averages during the Asian trading hours and ending at $1,592/mt on Friday, up 1.76% on the day. The most-liquid SHFE July contract also advanced 95 yuan/mt on the day to end at 13,275 yuan/mt, after rising to a session high of 13,295 yuan/mt, as investors covered short positions and added longs. Trading range today is seen at 13,100-13,350 yuan/mt with LME aluminium at $1,570-1,600/mt. 

Zinc: Three-month LME zinc came off after rising to a session high of $2,062/mt, ending the day 0.37% lower at $2,019.5/mt, with pressure above from the Bollinger upper band. With the reopening of overseas mines, expectations of tight ore supply declined and this weighed on zinc prices. LME zinc inventories shrank 1,600 mt, or 1.66% on Friday to 94,675 mt. 

The most-traded SHFE July contract fell with its LME counterpart, to a session low of 16,250 yuan/mt before it ended the Friday night at 16,325 yuan/mt, down 1.72% on the day. It lost support from the 40-day moving average as the morale of longs weakened with the rebound in domestic social inventories of refined zinc and declines in spot premiums. Today, the contract will likely hover between 16,200- 16,700 yuan/mt with LME zinc trading at $2,010-2,060/mt. 

Nickel: A rally in crude oil prices and better-than-expected US job data lifted three-month LME nickel, which broke up $13,000/mt to hit a session high of $13,015/mt. With pressure above from the Bollinger upper band, the LME nickel may test support from $13,000/mt today. The most-active SHFE contract found support from the five- and 10- day moving averages, climbing to a session high of 104,400 yuan/mt before ending at 103,750 yuan/mt, remaining in an upward trend. 

Lead: Three-month LME lead continued to outperform its SHFE counterpart, climbing 1.27% on the day to finish at $1,760.5/mt, amid expectations of demand recovery in the overseas market. The most-traded SHFE contract retreated after rising to a session high of 14,490 yuan/mt, ending the day 0.44% lower at 14,330 yuan/mt. Fundamentals weakened as inventories built for two straight weeks and imported lead entered. Supply pressure may see SHFE lead pulling back further in the short term. 

Tin: Three-month LME tin rose significantly last Friday and may test pressure from $16,500/mt today. Resistance above is expected from $17,100/mt if it successively breaks up $16,500/mt. The most-active SHFE August contract will likely test pressure from 138,000 yuan/mt today.