SMM Evening Comments (Mar 20): Shanghai base metals rebounded across the board on hopes of stimulus

SHANGHAI, Mar 20 (SMM) – SHFE nonferrous metals went higher across the board on Friday, recovering from the heavy losses in the prior two sessions, as investors hoped that more stimulus from governments and central banks will shield the world economy from the rapid spread of the coronavirus. 

Zinc led the increases with a rise of 4.22%. Copper advanced 2.45%, aluminum gained 0.46%, lead added 3.38%, tin increased 3.31%, and nickel expanded 2.95%. 

The ferrous complex closed mixed as iron ore gained 0.53%, rebar rose 0.64%, stainless steel grew 1.01%, while hot-rolled coil shed 0.09%, and coke lost 0.25%. 

The European Central Bank on Thursday launched a program to inject money into credit markets, and the US Federal Reserve has unveiled measures to support money-market funds and the borrowing of dollars. 

The SHFE has suspended night trading session until further notice.

Copper: The most-liquid SHFE May contract ended a four-day losing streak and rebounded to a session high of 39,100 yuan/mt, before it ended up 2.45% higher on the day at 38,910 yuan/mt. Investors covered their short positions, which reduced open interests of the contract by 8,844 lots to 110,000 lots. However, uncertainty about the size and duration of the COVID-19 impact may unlikely to sustain the price rally. The SHFE May contract is expected to test support from 38,000 yuan/mt. 

Aluminium: The most-active SHFE contract came off after climbed to a session high of 12,165 yuan/mt, stabilising around 11,935 yuan/mt and closed the day 0.46% higher at 11,995 yuan/mt. Amid high inventories and sluggish demand, weak fundamentals may cap any upside room of near-term aluminium prices. 

Zinc: The most-liquid SHFE May contract returned above 15,000 yuan/mt on improved market sentiment and closed 4.22% higher on the day at 15,055 yuan/mt. Domestic social inventories of zinc shrank this week, marking the first weekly decline after the Chinese New Year holiday, as reduced zinc prices encouraged downstream consumers to step up stockpiling. This also dampened morales of bearish positions. 

Nickel: The most-liquid SHFE June contract rose on short-covering, as it climbed to a session high of 96,660 yuan/mt and closed at 95,850 yuan/mt, 2.95% higher on the day. Pressure above from 96,000 yuan/mt will be monitored in the short term. 

Lead: The most-active SHFE May contract consolidated above the daily moving average with an intraday high of 13,410 yuan/mt, and finished the day 3.38% higher at 13,310 yuan/mt. Fundamentals and a rebound in LME lead supported the prices. The impact of virus development during this weekend will be closely watched. 

Tin: The most-traded SHFE June contract recovered as investors loaded up their long positions. It rose to an intraday high of 115,200 yuan/mt and pared some gains to close at 114,450 yuan/mt, up 3.31% on the day. However, it remained below all moving averages and resistance is seen from 118,000 yuan/mt.