SMM Evening Comments (Feb 17): Shanghai base metals closed mostly higher on Chinese support measures

SHANGHAI, Feb 17 (SMM) – Most of nonferrous metals on the SHFE closed higher on Monday, as investor sentiment improved following China’s fresh efforts to cushion the blow from the coronavirus outbreak.

Copper added close to 1% to its highest since the market reopened after the Lunar New Year holiday. Lead and tin climbed 0.7%, and zinc rose 0.4%. Aluminium and nickel shed about 0.3%.

The ferrous complex traded mixed. Iron ore surged close to 2.7% to register a five-day winning streak, rebar rose 1.2%, and hot-rolled coil gained 1.1%, while coking coal and coke lost 0.3%, and stainless steel sank 0.6%.

The People's Bank of China (PBOC) on Monday said it was lowering the rate of 200 billion yuan ($28.65 billion) worth of one-year medium-term lending facility (MLF) loans to financial institutions by 10 basis points (bps) to 3.15%.

PBOC’s move came after China's Finance Minister on Sunday said that Beijing would roll out targeted and phased tax and fee cuts. The Ministry of Finance said on Saturday that it would provide 8 billion yuan in a second round of support for virus prevention and control efforts.

The head of Wuhan Leishenshan hospital said over the weekend that a turning point for the epidemic has been reached. China reported 2,048 additional coronavirus cases by the end of February 16, bringing the total case count to 70,548, according to a statement from National Health Commission.

The preliminary reading of Japan’s fourth quarter (Q4) 2019 GDP showed that the country’s economy shrank at the fastest pace in almost six years, triggering recessionary fears of Asia’s top-tier economy. Singapore and Thailand cut their growth outlooks for this year.

China’s futures markets have suspended night trading session until further notice.

Copper: The most-traded SHFE 2004 contract climbed to its highest since January 23 at 46,500 yuan/mt, before it closed the day 0.96% higher at 46,490 yuan/mt. It is likely to continue to test 46,500 yuan/mt, but uncertainty around the epidemic will hamper upside potential in copper prices. The 2002 contract finished its last trading day 0.85% higher at 46,030 yuan/mt, with settlement price of 45,750 yuan/mt, and 101,775 mt of cargoes were delivered.

Aluminium: The SHFE 2004 contract slipped to its lowest in more than a week at 13,660 yuan/mt, before it recovered some ground to close the day 0.26% lower at 13,690 yuan/mt. Investors lacked confidence in the March and April contracts, as the resumption of downstream consumers remained subdued amid the epidemic outbreak.  

Zinc: The most-liquid SHFE 2004 contract rose for a third straight day, gaining 0.41% on the day to end at 17,260 yuan/mt, its highest close in a week.

Nickel: The most-traded SHFE 2004 contract strengthened slightly in afternoon trade, recouping some of earlier losses to end the day 0.34% weaker at 105,210 yuan/mt. SHFE nickel still sits around 105,000 yuan/mt, which it has been hovering around since last week. The 2002 contract wrapped up its trading at settlement price of 104,360 yuan/mt, with 12,552 mt being delivered.   

Lead: The most-liquid SHFE 2004 contract rose 0.7% on the day to end at 14,445 yuan/mt, its highest close since January 23, as bullish funds continued to enter the market. SHFE lead extended the rally from last week, but the pace appeared to have slowed slightly as strong resistance lies at the 20-day moving average and 14,600 yuan/mt.

Tin: The most-traded SHFE 2006 contract reversed an earlier slip to its highest in two weeks at 135,600 yuan/mt, before closing the day 0.7% higher at 135,530 yuan/mt. SHFE tin is supported by the 10-day moving average, but faces resistance at 136,000 yuan/mt.