SMM Evening Comments (Apr 22): Shanghai base metals closed mixed as meltdown in oil continued

SHANGHAI, Apr 22 (SMM) – SHFE base metals closed mixed on Wednesday, as the historic oil price plunge continued.

The mixed performance of the nonferrous complex came after a broad decline in early morning trade. Zinc, aluminium and lead managed to rebound into the green and closed the day 0.6%, 0.5% and 0.3% higher, respectively.

Copper, tin and nickel recovered some ground from earlier losses, but still finished the day substantially lower, down 1.5%, 2.4% and 3%, respectively.

The SHFE will keep its night trading session suspended.  

On the LME, base metals also have temporarily stemmed their declines and were mixed as of 18:26 Beijing time.

International benchmark Brent crude dipped below $16 per barrel, before recovering some of those losses. The US dollar, meanwhile, held near two-week highs against a basket of peers.

Copper: The entry of shorts knocked the most-liquid SHFE June contract to a two-week trough of 40,350 yuan/mt in early morning trade. The contract later returned above the 41,000 mark and finished the day 1.49% lower at 41,090 yuan/mt, below the five-, 10- and 40-day moving averages.

Chile's Antofagasta on Wednesday cut capital expenditure for the year and said copper production would be at the lower end of guidance due to the coronavirus pandemic.

Aluminium: The aggressive load-up of long positions lifted the most-traded SHFE June contract into the green, which notched an intraday high of 12,245 yuan/mt in afternoon trade before erasing some gains to close the day 0.49% firmer at 12,195 yuan/mt. The May contract’s premiums over the June contract widened to 85 yuan/mt, as the dash by traders to fulfill long-term supply contracts at the end of the month tightened spot availability and buoyed spot premiums. The June contract is expected to hover at 12,000-12,250 yuan/mt tomorrow.

Zinc: Resumed buying by longs helped the most-traded SHFE June contract rebound from an earlier slip to the 15,850 yuan/mt level. The contract gained 0.6% to end the day at 15,860 yuan/mt. It is likely to return to the 16,000 mark amid positive fundamentals.

Nickel: The most-traded SHFE June contract plummeted below the 40-day moving average to the 96,800 yuan/mt level in early morning trade. It later recovered some ground, but was still down 2.96% on the day and ended at 98,050 yuan/mt. The contract has yet to lose support from the 10- and 40-day moving averages, but may meet resistance at the 60-day one at 100,000 yuan/mt.

Lead: Bargain-hunting bolstered the most-liquid SHFE June contract from a three-week low of 13,425 yuan/mt to an intraday high of 13,735 yuan/mt, before the contract closed the day 0.29% firmer at 13,645 yuan/mt. The absence of evident signs of supply increase in China kept shorts from aggressively loading up positions. SMM will release weekly China lead ingot inventory data on Friday, and the inventories are likely to turn around and post a consistent uptrend after the Labour Day holiday.

Tin: The most-traded SHFE June contract hovered in a tight range above the daily moving average—around 123,400 yuan/mt—after being sent to its lowest in one week and a half at 122,200 yuan/mt, near the 20-day moving average, due to the buildup of short positions. The contract is likely to test support at 122,000 yuan/mt, the low-end of its recent trading range.