SMM Morning Comments (Mar 27): Base metals rose on stimulus support

SHANGHAI, Mar 27 (SMM) – London and Shanghai base metals cruised mostly higher in early morning trade on Friday, as a series of stimulus steps around the world, including a gigantic US package, calmed a panic over a global recession following the coronavirus outbreak.

Shanghai copper opened higher and oscillated between gains and losses.

The US Senate approved a $2 trillion economic relief package late Wednesday. G20 nations pledged to inject $5 trillion into the global economy after a virtual summit on Thursday. US Federal Reserve Chairman Jerome Powell said Thursday that the central bank will not “run out of ammunition” to keep the economy stable.

The US dollar is on track for its biggest weekly fall in more than a decade, while US stocks surged for a third straight day overnight.

Overnight on the LME, base metals, except for zinc and lead, closed lower overnight. Tin dropped 1.7% on the day to lead the losses, copper sank 1.2%, nickel fell 1.1%, and aluminium shed 0.5%. Zinc gained 0.8% and lead surged 2.6%.

The SHFE kept its night trading session suspended.

Data published on Thursday showed that Americans filing for unemployment benefits soared to 3.28 million last week, by far a record. That number blew past the Great Recession peak of 665,000 and the all-time mark of 695,000 in October 1982.

Copper: Three-month LME copper experienced a volatile trading session on Thursday, and closed lower at $4,814/mt, after two days of gains.

Aluminium: Three-month LME aluminium slipped to its lowest since April 2016 at $1,528/mt in early European trading hours, before it recovered some ground to end the day lower at $1,540/mt. It is expected to move between $1,530-1,600/mt today, with the most-active SHFE 2005 contract trading at 11,500-12,000 yuan/mt. East China spot discounts are seen unchanged at 90-70 yuan/mt against the SHFE 2004 contract, as inventories in China have not reached a peak yet.

Zinc: Three-month LME zinc strengthened for a third straight day, hitting an intraday high of $1,886/mt in North American trading hours before erasing some gains to end at $1,864.5/mt, its highest close in more than a week. It has yet to shrug off resistance at the 10-day moving average. LME zinc is expected to hover at $1,830-1,880/mt today with the most-traded SHFE May contract at 14,800-15,300 yuan/mt. Spot premiums for domestic 0# Shuangyan are seen unchanged at 20-40 yuan/mt over the SHFE April contract.

Nickel: Three-month LME nickel weakened after a volatile trading session and closed the day at $11,215/mt. Support was strong at the five-day moving average. The contract is expected to continue to oscillate between $11,100-11,300/mt today.

Lead: Three-month LME lead surged for a second straight day, to end at $1,692/mt, its highest close in nearly two weeks. LME lead is unlikely to stage a sustained rally before the pandemic crisis is over.  

Tin: Three-month LME tin jumped to its highest in more than a week at $14,560/mt in North American trading hours, after hovering in a tight range around $13,950/mt, below the daily moving average earlier in the day. It later erased all those gains to finish the day lower at $13,995/mt, below the 10-day moving average. Support is seen at the five-day moving average at $13,600/mt, while resistance is at a previous high of $14,500/mt.