SMM Evening Comments (Jul 29): Shanghai base metals mostly ended higher amid weaker US dollar, rebounded A-shares

SHANGHAI, Jul 29 (SMM) – SHFE nonferrous metals mostly closed higher on Wednesday July 29, on the backdrop of a weaker US dollar and a rebound in Chinese shares.

Zinc jumped 3.0% to lead the way up, aluminium surged 1.5%, lead gained 1.2%, copper rose 0.4%, while nickel fell 0.5% and tin slipped 0.9%.

The ferrous complex, except for stainless steel and coking coal, closed higher. Iron ore was the best performer with a rise of 2.3%. Rebar gained 0.67%, hot-rolled coil rose 0.56% and coke advanced 0.48%. SMM data showed that hot-rolled coil inventories in Shanghai fell 38,100 mt from the prior week and 232,500 mt from the previous year to 299,600 mt this week, as floods extended the water transport period of cargoes.

Oil prices steadied after a surprise drop in US inventories. The American Petroleum Institute (API) reported late Tuesday that US crude supplies fell by 6.8 million barrels for the week ended July 24. Inventory data from the US Energy Information Administration (EIA) will be released at 22:30 tonight. The market remained concerned that sliding demand for fuels amid the COVID-19 pandemic may lead to an oil supply glut.  

The US Federal Reserve is set to announce its interest rate decision Wednesday, and the market anticipates a dovish statement.

Copper: The most-traded SHFE copper contract fell to an intraday low of 51,640 yuan/mt this morning, before surging to an intraday high of 51,990 yuan/mt as investors added their long positions and finished the day 0.35% higher at 51,880 yuan/mt. Open interest increased 5,412 lots to 120,000 lots. More economic stimulus packages are expected to be launched at the upcoming Fed open market committee meeting. Improved risk appetite may keep the contract robust tonight.  

Aluminium: The most-active SHFE aluminium 2009 contract finished the day 1.5% higher at 14,505 yuan/mt in chopping trading. Open interest rose 15,742 lots to 124,087 lots. Aluminium inventories held largely unchanged below 700,000 mt, which will support the contract.

Zinc: The most-liquid SHFE 2009 zinc contract gave up some gains after surging to an intraday high of 18,720 yuan/mt, and ended 2.95% higher at 18,695 yuan/mt. Trade volume increased 10,601 lots to 299,000 lots, and open interest rose 15,142 lots to 113,000 lots. The contract is expected to remain robust tonight amid prospects for strong consumption.  

Nickel: The most-active SHFE October nickel contract gave up gains from the early session today and declined to an intraday low of 109,310 yuan/mt, and ended 0.54% lower at 109,500 yuan/mt. Open interest lost 3,122 lots to 135,088 lots. The contract will likely test 110,000 yuan/mt tonight.

Lead: The most-active SHFE 2009 lead contract surged to a fresh high since December 2019 of 15,580 yuan/mt, before relinquishing some gains to end 1.2% higher at 15,555 yuan/mt. Open interest rose 656 lots to 23,677 lots. Consumption is expected to improve considering the upcoming high season. Whether the contract could reach the target level of 15,600 yuan/mt tonight will come under scrutiny.

Tin: The most-liquid SHFE October tin contract failed to hold onto gains from the early session today, as it pulled back after surging to an intraday high of 150,830 yuan/mt, ending 0.4% lower at 147,570 yuan/mt. Open interest rose 3,050 lots to 25,836 lots. Support below is seen from 145,500 yuan/mt.