SMM Morning Comments (Mar 2): Shanghai base metals opened mostly higher on Monday

SHANGHAI, Mar 2 (SMM) – Most SHFE nonferrous metals opened higher on Monday morning, recovering from losses a week earlier. 

LME base metals closed mostly lower last Friday as the fast-spreading coronavirus fueled demand concerns among investors. Nickel led the decline and lost 1.25%, tin fell 0.7%, zinc slid 0.22%, copper shed 1.19%, while aluminum gained 0.65%, and lead added 1.79%. The SHFE night trading session remained suspended.

Copper: Three-month LME copper extended its slide last Friday, ending 1.19% lower on the day at $5,588.5/mt on the back of worries about a further escalation in coronavirus outbreak outside China. The US stock market slumped over 10% last week, and Chinese manufacturing activity plunged to an all-time low in February, reinforcing concerns about the virus impact on the global economy. Inventories of copper continued to pile up, with the SHFE copper stocks adding 12,000 mt and LME copper inventories climbing 55,000 mt last week. This, together with concerns about the strength of demand recovery, will keep copper prices under pressure this week. Three-month LME copper is seen trading at $5,560-5,620/mt today with the most-liquid SHFE contract at 45,300-45,700 yuan/mt. Spot discounts are likely at 120-80 yuan/mt as lower futures prices may attract some purchase demand. 

Aluminium: Three-month LME aluminum fell to the lowest level since November 2016, at $1,665/mt, but regained losses and finished 0.65% higher on the day at  $1,701.5/mt. The most-active SHFE contract has slipped to the lowest level in three years and may trade between 13,100-13,400 yuan/mt today, with LME aluminum at $1,670-1,710/mt today. 

Zinc: Three-month LME zinc slipped to an intraday low of $1,970/mt before it trimmed some losses and closed 0.22% lower on the day at $2,021/mt. Concerns about the economic impact the coronavirus intensified with the stock markets accelerating their declines. But the orderly resumption of Chinese downstream producers, recovery of logistics and potential further output cut at some smelters may underpin prices. Today, three-month LME zinc is expected to trade between $2,000-2,050/mt, with the most-traded SHFE contract at 15,600-16,100 yuan/mt. 

Nickel: Three-month LME nickel remained in a downward trend, closing down 1.25% on the day at $12,225/mt as it retreated from a high of $12,400/mt. It broke down the Bollinger lower band, and may trade between the five-day moving average and $12,000/mt today. 

Lead: Three-month LME lead recovered from a session low of $1,778.5/mt on greater expectations of a US Fed interest rate cut. It ended up 1.79% on the day at $1,848.5/mt. A turning point in the trend of COVID-19 cases outside China will be monitored in the short term. 

Tin: Three-month LME tin moved lower last Friday, closing $115/mt lower on the day at $16,210/mt with LME tin inventories falling 45 mt to 7,545 mt. Support below is expected from $16,000/mt today.