SMM Evening Comments (Apr 13): Shanghai base metals closed mostly higher as investors monitored coronavirus, oil production cuts

SHANGHAI, Apr 13 (SMM) – SHFE nonferrous metals closed mostly higher on Monday, as investors monitored the coronavirus and an agreement between OPEC and its allies for record oil production cuts.

Copper added 1.5% on the day to lead the gains, tin rose 1.2%, zinc and lead climbed more than 0.9%, while aluminium dipped less than 0.1% and nickel fell 0.7%.

The LME is closed Monday for the Easter Monday holiday.

OPEC and its oil producing allies on Sunday agreed a historic deal to cut production by 9.7 million barrels per day, making it the single-largest output reduction on record. The agreement signals the end to an oil price war between OPEC kingpin Saudi Arabia and non-OPEC leader Russia, which had sent prices 40% lower since early March.

Oil prices rose in early Monday morning trade following the news, but pared gains in the afternoon of Asian trading hours.

Investors, meanwhile, continued to monitor developments surrounding the global coronavirus pandemic. There have been more than 1.8 million confirmed cases globally while at least 112,241 lives have been taken, according to data compiled by John Hopkins University.

Dr. Anthony Fauci, director of US National Institute of Allergy and Infectious Diseases, said on Sunday he was cautiously optimistic that the outbreak was slowing down in the US. He also said parts of the country may start to reopen next month.

Copper: The most-liquid SHFE June extended its rally, notching its highest in nearly four weeks at 41,930 yuan/mt before ending the day 1.46% stronger at 41,780 yuan/mt.

Aluminium: The most-traded SHFE June contract weakened in afternoon trade, erasing earlier gains to end the day 0.08% weaker at 11,755 yuan/mt.

Zinc: The most-traded SHFE June contract hit a four-day high of 15,805 yuan/mt in early afternoon trade, before it erased some gains to close the day about 1% higher at 15,735 yuan/mt. Short-term moving averages have staged a turnaround to expand upwards. SMM data showed that social inventories of zinc ingots in China continued to trend lower over the weekend, while losses in TCs justified tightness in ore supply. That paints upbeat fundamentals for zinc prices.

Nickel: The most-traded SHFE June contract slipped to an intraday low of 96,020 yuan/mt in afternoon trade, near the middle Bollinger band, before it clawed back some losses to close the day 0.65% lower at 96,430 yuan/mt. Today’s move lower came after a sharp increase last week. Whether SHFE nickel could continue its rally and stand above 98,000 yuan/mt will come under scrutiny.

Lead: The most-liquid SHFE May contract reversed an early slip and climbed into the green, as supply tightness in the physical market and firm spot premiums forced shorts to exit. The contract gained 0.94% on the day to end at 13,945 yuan/mt, its highest close since March 16. Cross currents—slower inventory decline in China and continued tightness in secondary lead smelting raw material—are expected to keep lead prices in swinging trades in the near term.

Tin: Short-covering bolstered the most-traded SHFE June contract to a four-week high of 128,730 yuan/mt in afternoon trade, before the contract eased to finish the day 1.2% higher at 126,990 yuan/mt. SHFE tin now sits around the 40-day moving average. Resistance is seen at 130,000 yuan/mt while support is at the five-day moving average at 124,000 yuan/mt.