SMM Morning Comments (Feb 3): Base metals fell broadly on first day of opening after CNY holidays

SHANGHAI, Feb 3 (SMM) – Shanghai base metals tumbled across the board on Monday morning after returning from an extended Chinese New Year holiday, as the novel coronavirus outbreak raised fears of a slowdown in demand.

Copper: Three-month LME copper slipped to a new five-month low of $5,533.5/mt on Friday, before it closed the trading day 0.08% lower at $5,560.5/mt. An SMM survey showed that a slew of Chinese copper processors will delay their resumption of work amid the coronavirus outbreak, which will reduce demand for copper and lead to a copper oversupply as smelters have maintained normal production. LME copper is expected to move between $5,520-5,580/mt today. The most active SHFE 2003 contract fell its daily limit to 44,780 yuan/mt at the open on Monday. Spot prices are seen at a premium of 100-150 yuan/mt given low inventories and weakened prices of futures.

Aluminium: Three-month LME aluminium slipped to its lowest in more than three months at $1,714/mt on Friday, before it recovered some ground to end the trading day 0.2% lower at $1,725/mt, marking an eight-day losing streak. It is expected to stem its decline and trade between $1,700-1,750/mt today.

Zinc: Three-month LME zinc slipped to its weakest in more than three years at $2,163/mt on Friday, before it rallied to close the trading day 0.96% higher at $2,208/mt. LME zinc found support at the lower Bollinger band, but met pressure at the five-day moving average. Zinc inventories across LME warehouses extended their decline to a record low of 48,775 mt, while the premium of LME cash zinc over the three-month contract stayed at highs. That indicated worries about zinc supply and offered support to prices. LME zinc is expected to trade between $2,180-2,230/mt today. The most active SHFE 2003 contract is expected to move at 17,200-17,700 yuan/mt today.

Nickel: Three-month LME nickel strengthened 1.63% on Friday to end at $12,790/mt, its highest close in a week. 

Lead: Three-month LME lead rebounded 2.71% on Friday to end at $1,877/mt, after touching an eight-month low of $1,797/mt in the previous session.

Tin: Three-month LME tin gained 2.49% on Friday to end at $16,435/mt, its highest close in a week. LME tin dropped to a five-month low of $15,690/mt on Thursday, before it clawed back some losses to close at $16,035/mt. Immediate support is seen at $16,000/mt, with next support at $15,700/mt.