SMM Evening Comments (May 13): Shanghai base metals extended decline on virus resurgence concerns

SHANGHAI, May 13 (SMM) – SHFE nonferrous metals ended lower across the board on Wednesday amid cautious trading, extending a broad decline from the prior day, as investors became increasingly concerned about a potential second wave of coronavirus cases.

Lead relinquished Tuesday’s gains and shed 2.08%. Copper eased 0.51%, aluminium fell 0.12%, zinc declined 1.51%, tin dropped 0.44% and nickel went down 0.6%. 

The ferrous complex traded in a mixed note, as iron ore added 2.14%, rebar climbed 0.26%, hot-rolled coil rose 0.33%, while stainless steel dipped 0.55% and coke lost 0.46%. 

Developments on the coronavirus front likely continued to weigh on investor sentiment. Dr. Anthony Fauci, the top infectious disease expert in the US, that premature moves to reopen the economy could lead to a second wave of cases and set back economic recovery.

The market focuses on US Federal Reserve Chairman Jerome Powell's speech on current economic issues on Wednesday.

Copper: Loaded-up shorts sent the most-traded SHFE contract to a session low of 42,680 yuan/mt in early trades after opening, but it pared some losses in the afternoon, ending 0.51% lower on the day at 42,900 yuan/mt. Concerns about near-term oversupply of copper eased after Zambia temporarily shut its border with Tanzania to enhance measures to slow the spread of the coronavirus, which delayed its main copper exports via Dar es Salaam. Tonight, the contract is expected to test support from 43,000 yuan/mt. 

Aluminium: The most-liquid SHFE contract continued to face mounting pressure from loaded-up shorts, finishing the day 0.12% lower at 12,495 yuan/mt, following an intraday high of 12,525 yuan/mt near closing. It stayed below the 60-day moving average and any upward room tonight could be limited. 

Zinc: The most-active SHFE July contract declined for the third consecutive session as it failed to test resistance from the daily moving average, ending down 1.51% lower on the day at 16,615 yuan/mt. Continued elevated social inventories depressed confidence in longs.

Nickel: The most-traded SHFE July contract bounced back after dipped to an intraday low of 99,720 yuan/mt, returning above 100,000 yuan/mt and ended the day 0.6% lower at 101,140 yuan/mt. Support was strong at the 20-day moving average. Mixed signals are likely to keep the contract rangebound in a broad band. Support from the 10-day moving average will be monitored tonight. 

Lead: The most-active SHFE June contract gave up gains from the prior day, losing 2.08% on the day to finish at 13,885 yuan/mt. Amid low social inventories of lead ingot, further downside room in prices will be capped before the delivery for the SHFE May contract. 

Tin: The most-liquid SHFE July contract stabilised around the daily moving average, or 130,200 yuan/mt, and closed 0.44% lower on the day at 130,250 yuan/mt. Support below is seen from 129,000 yuan/mt.