SMM Evening Comments (Jul 1)

SHANGHAI, Jul 1 (SMM) – SHFE nonferrous metals closed mixed on the first trading day of July as investors reassessed US-China trade talks and amid disappointing factory data from China, the world’s top consumer of many metals.

Lead saw the biggest gain of 1.5%, copper rose 0.8% and zinc nudged up 0.03% while aluminium fell 0.6%, tin declined 0.8% and nickel dropped 2.1%.

The ferrous complex, however, ticked up across the board. Iron ore jumped 4.7%, coke advanced 3.2%, rebar rose 1.6%, hot-rolled coil gained 1.3% and coking coal increased by 1.1%.

Oil prices received a boost after Russian President Vladimir Putin announced over the weekend that Russia reached an agreement with Saudi Arabia to extend the oil output deal by six to nine months.

Copper: The most active SHFE August contract jumped to a high of 47,420 yuan/mt shortly after this morning’s opening bell, and traded rangebound in the rest trading hours to close the trading day 0.77% higher at 47,360 yuan/mt. Despite support from the latest developments in US-China trade talks and OPEC-led production cuts as well as technical indicators, copper prices face headwinds from an increase of 8,000 mt in Guangdong stocks. SHFE copper is expected to find some cues from its LME counterpart tonight, and try to hold onto its ground above 47,200 yuan/mt.

Aluminium: The most traded SHFE August contract reversed its initial, moderate gains to a 3.5-month low of 13,720 yuan/mt after SMM data showed a smaller decline in social inventories of primary aluminium ingots in China over the weekend. This grew concerns about consumption in a low season in the third quarter. The contract closed 0.58% lower at 13,750 yuan/mt, below all short-term moving averages. It is expected to remain weak and rangebound tonight, awaiting more cues around consumption.

Zinc: The most active SHFE August contract followed its LME counterpart higher in early morning trade, to an intraday high of 20,095 yuan/mt before it gave up most of the gains to close at 19,860 yuan/mt. The unwinding of short positions accounted for today’s gains, suggesting limited upward momentum in SHFE zinc. With continued weakness in fundamentals, strength at the 20-day moving average will come under scrutiny tonight.

Nickel: As longs trimmed their positions, the most traded SHFE August contact dropped after moderately rising to a high of 102,330 yuan/mt, losing more than 2% on the day to end at 99,670 yuan/mt. This snapped a four-day winning streak. Strength at the 10-day moving average and 99,000 yuan/mt is under scrutiny tonight.

Lead: The most active SHFE August contract climbed during the day, shrugging off resistance from the 60-day moving average to close at a high of 16,275 yuan/mt, up 1.53% on the trading day. We see limited further upside in SHFE lead, as short-covering primarily accounted for today’s gains and given strong resistance from the 16,300 yuan/mt level. The contract is expected to try to remain above the 60-day moving average tonight.

Tin: The most traded SHFE September contract traded rangebound during the day, failing to recover from Friday night’s losses to close 0.81% lower at 142,300 yuan/mt. The load-up of short positions primarily accounted for today’s losses. Support is seen at 141,500 yuan/mt.