SMM Morning Comments (Feb 20): Most Shanghai base metals extended rise on Thursday morning

SHANGHAI, Feb 20 (SMM) – SHFE nonferrous metals traded higher for the most part on Thursday morning. Investors’ risk appetite was lifted on the back of a decline in the number of new coronavirus cases in China and expectations for more policy stimulus to revive domestic consumption. 

LME base metals closed mixed last night. Tin advanced 1%, copper climbed 0.3%, aluminium gained 0.2%, while zinc and nickel edged lower, and lead slipped 0.7%. The SHFE night trading session remained suspended.

Copper: Three-month LME copper rebounded on a rally in oil prices, after a strengthened US dollar depressed LME copper to a session low of $5,714/mt. It finished the day 0.33% higher at $5,784/mt. Oil prices climbed to the highest level this month as investors weighed supply disruptions in Venezuela and Libya. This, together with technical support, is likely to keep LME copper between $5,750-5,810/mt today, with the most-traded SHFE contract at 46,200-46,500 yuan/mt. Spot discounts are likely at 230-200 yuan/mt as sellers remain keen to destock given slow resumption of downstream demand, even as the government prods companies to restart operations. 

Aluminium: Three-month LME aluminium rallied after fell to a session low of $1,710/mt, ending up 0.2% on the day at $1,725/mt. Both open interest and transaction volumes shrank. A strong US dollar is likely to keep LME aluminium between $1,710-1,750/mt today, with the most-traded SHFE contract hovering at 13,600-13,800 yuan/mt. 

Zinc: Three-month LME zinc pared some losses after loaded-up shorts weighed it to an intraday low of $2,120.5/mt. It ended the session 0.02% lower at $2,143.5/mt, with LME zinc inventories falling 100 mt to 74,600 mt. Downstream demand in the domestic market has not improved significantly due to a lack of workers and some logistical hurdles. But any downsides in zinc prices will be limited as some smelters have cut production on the back of inventory pressure of sulphuric acid. Today, LME zinc is expected to trade between $2,130-2,180/mt with the most-liquid SHFE contract at 17,100-17,500 yuan/mt. 

Nickel: Three-month LME nickel found support from $12,800/mt and recovered after slipped to a low of $12,700/mt, ending down 0.04% on the day at $12,850/mt. Pressure above from $13,000/mt will be monitored. 

Lead: Three-month LME lead gave up increase from the prior session and fell 0.69% to close at $1,874/mt, but its trading range moved higher from the previous day. An intensified backwardation structure is likely to support three-month LME lead in the near term. 

Tin: Three-month LME tin rose on Wednesday as it hit an intraday high of $16,635/mt and trimmed some gains to finish at $16,590/mt, up $160/mt on the day. Pressure above from $16,900/mt will be watched today.