SMM Morning Comments (Apr 20): Shanghai base metals opened mixed Monday, nickel added more than 2%

SHANGHAI, Apr 20 (SMM) – SHFE nonferrous metals opened in a mixed note on Monday morning, following a broad rally last Friday, with nickel extending increases by as much as more than 2% on Monday. 

China cut its benchmark lending rate as expected on Monday to reduce borrowing costs for companies and provide support for the coronavirus-hit economy, which shrank for the first time on record in Q1. 

LME base metals closed mostly higher last Friday with nickel leading the gains and adding 2.64%. Copper advanced 1.83%, zinc increased 0.98%, tin climbed 0.7%, while aluminium shed 0.53% and lead slipped 0.8%. 

US stock futures traded lower on Sunday night as investors weighed the latest news on the coronavirus front along with another decline in crude prices.

Crude oil futures fell on Sunday evening, extending last week's weakness on the back of falling demand amid the COVID-19 pandemic that has claimed more than 159,000 lives worldwide.

Aluminium: Three-month LME aluminium lost gains from the Asian trading hours as investors loaded up shorts on fundamental weakness. It slipped from an intraday high of $1,534/mt, closing at $1,505/mt, down 0.53% on the day. Trading range today is seen at $1,490-1,540/mt, with the most-liquid SHFE contract trading at 12,300-12,480 yuan/mt. Continued declines in domestic aluminium inventories amid demand resumption will support SHFE aluminium. 

Zinc: Three-month LME zinc broke up pressure from the 40-day moving average in a broad rally of base metals. It lost steam after hitting a session high of $1,962.5/mt, trimming some gains and ended at $1,951/mt, up 0.98% on the day. LME zinc inventories shrank 850 mt on Friday to 98300 mt, still at high levels. The gradual recovery of overseas automakers will lift zinc consumption, but demand may not rise significantly as end-users have not shown signs of returning. The upsides of LME zinc will be limited, with trading range expected at $1,910-1,960/mt today. The most-active SHFE contract is seen trading at 15,700-16,200 yuan/mt today. 

Nickel: Three-month LME nickel extended its upward trend, testing pressure from $12,050/mt and finished 2.64% higher on the day at $12,070/mt. It broke resistance from the 40-day moving average, which lent some support to LME nickel. Today, LME nickel is expected to hover between the five- and 40- day moving averages with pressure from $12,250/mt. 

Lead: Three-month LME lead came off after rose to an intraday high of $1,708/mt, closing the day 0.8% lower at $1677/mt, with the 20-day moving average lending some support. There remain further downside risks in the short term. 

Tin: Three-month LME tin consolidated at high levels, climbing to a session high of $15,400/mt and ending 0.7% higher on the day at $15,175/mt. LME tin inventories shrank 85 mt on Friday to 6,590 mt. Today, support is seen from $15,000/mt, with pressure above from $15,700/mt.