SMM Evening Comments (Feb 11): Shanghai base metals rallied on slower virus spread and production resumption

SHANGHAI, Feb 11 (SMM) – Shanghai nonferrous metals, except for zinc, turned higher on Tuesday, as investor sentiment recovered with an apparent slowdown in the rate of coronavirus infection, even as the death toll crossed 1,000.

The re-openings of some factories in China also helped lift investor sentiment, although doubts lingered about how quickly the country’s factories could get back to work.

SHFE nickel added 1.6% to lead the gains, lead, tin and aluminium advanced about 0.7% and copper rose 0.2%. Base metals on the LME, meanwhile, cruised higher across the board.

The ferrous complex firmed substantially on the day. Iron ore rose 4.4% to lead the way higher. Coking coal and coke increased more than 3.1%, Rebar climbed 2.7%, hot-rolled coil gained 2.2%, and stainless steel advanced 0.9%.

China’s futures markets have suspended night time trading since last week until further notice.

Copper: The most-traded SHFE 2003 contract rallied on Tuesday, after two consecutive days of losses. It gained 0.22% on the day to end at 45,580 yuan/mt. Lingering uncertainties about the epidemic capped gains in copper prices. SHFE copper has yet to convincingly stand above the five-day moving average, and whether it could hold to the 45,500 yuan/mt level will come under scrutiny tomorrow.

Aluminium: The most-active SHFE 2003 contract rose to its highest since February at 13,840 yuan/mt in morning trade, before it erased some gains to close the day 0.66% higher at 13,780 yuan/mt. It has risen for five consecutive days, pointing to persistent expectations of consumption recovery. The unwinding of some short positions ahead of the February delivery also helped lift the contract.

Zinc: The most-active SHFE 2004 contract bucked the uptrend across Shanghai nonferrous metals, losing 0.29% on the day to end at 17,125 yuan/mt. It slipped to 17,140 yuan/mt at the open, and hovered in a range of 30 yuan/mt to finish the day. Delayed demand amid the outbreak and growing inventories are likely to weigh on SHFE zinc prices in the short term. Support at 17,000 yuan/mt will be closely watched.

Nickel: The most-active SHFE 2004 contract rallied to a more than one-week high of 106,680 yuan/mt shortly before it ended the day 1.56% higher at 106,190 yuan/mt. The converging five- and 10-day moving averages are likely to offer strong support to SHFE nickel.

Lead: The most-traded SHFE 2003 contract climbed to an intraday high of 14,080 yuan/mt in early morning trade before it eased to close the day 0.72% higher at 14,070 yuan/mt. Resistance at the five-day moving average was strong. Muted spot trades are expected to hamper upside potential in SHFE lead, as logistics constraints subdue demand from downstream consumers.

Tin: The load-up of long positions took the most-liquid SHFE 2006 contract to an intraday high of 135,200 yuan/mt, before the contract relinquished some gains to close to close the day 0.69% firmer at 134,800 yuan/mt. It is supported by the five-day moving average, but under pressure from the 10-day one. Resistance is seen at 136,000 yuan/mt.