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SMM Morning Comments (Feb 12): Shanghai base metals mixed as investors watch virus developments
Feb 12,2020 09:51CST
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LME base metals closed higher across the board overnight

SHANGHAI, Feb 12 (SMM) – SHFE nonferrous metals traded mixed on Wednesday morning, as investors continued to monitor the ongoing coronavirus outbreak.

Risk appetite appeared to improve on Tuesday, as the number of new coronavirus cases in China slowed and businesses in the country gradually returned to work. LME base metals closed higher across the board overnight. Lead added 2.5% on the trading day to lead the gains, aluminium jumped 1.9%, nickel advanced 1.6%, copper rose 1.2%, zinc gained 0.4% and tin climbed 0.2%.

Their counterparts on the SHFE, except for zinc, turned higher on Tuesday. Nickel added 1.6% to be the biggest gainer, lead, tin and aluminium advanced about 0.7% and copper rose 0.2%. The SHFE has suspended night time trading since last week until further notice.

The US dollar eased off four-month highs against a basket of rivals on Tuesday, snapping a six-day winning streak. US gold futures prices dipped, while oil prices rebounded from 13-month lows.

Beijing’s efforts to offset the economic impact of the epidemic also helped lift investor sentiment. The Ministry of Finance disclosed on Tuesday that 1.848 trillion yuan ($264.9 billion) of a new local government bond quota has been allocated, much earlier than previous years, to accelerate the fundraising process and strengthen infrastructure investment to stabilise the economy.


Copper: Three-month LME copper rose swiftly to an intraday high of $5,777/mt in overnight trading, before it eased to finish the trading day 1.17% stronger at $5,725/mt. An SMM survey showed a substantial decline in operating rates across Chinese processors in February, indicating that delayed resumption amid the epidemic outbreak has hurt demand for copper, which will hamper upside potential in copper prices. LME copper is expected to trade between $5,700-5,750/mt today, with its SHFE counterpart at 45,700-46,100 yuan/mt. Spot discounts are likely to seen at 100-60 yuan/mt. Cash flow woes forced sellers to offer a discount of up to 100 yuan/mt, but the upcoming February delivery will keep the discounts from widening further.


Aluminium: Three-month LME aluminium rallied 1.87% on Tuesday to end at $1,739/mt, recouping losses from the two previous days. It is expected to move between $1,700-1,760/mt today, with SHFE aluminium at 13,600-14,000 yuan/mt.


Zinc: Three-month LME zinc came off from an intraday high of $2,174.5/mt to an intraday low of $2,136/mt on Tuesday, before it climbed back to positive territory to close the trading day 0.35% higher at $2,154/mt. LME zinc was under pressure from the five-day moving average, but supported by the lower Bollinger band. Zinc inventories across LME warehouses extended their gains on Tuesday, increasing 1.23% to 72,025 mt. Lingering concerns about near-term demand amid the epidemic outbreak will continue to weigh on LME zinc prices, which are expected to trade between $2,130-2,180/mt today. The most-liquid SHFE 2004 contract are likely to move at 17,000-17,500 yuan/mt. Spot premiums of domestic 0# Shuangyan over the SHFE 2003 contract are seen at a maximum of 20 yuan/mt.  


Nickel: Three-month LME nickel rose to the $13,200/mt level, near the 20-day moving average, in Asian trading hours, but eased to the daily moving average at $13,170/mt in European trading hours. It finished the trading day 1.55% higher at $13,120/mt. LME nickel still resides around $13,000/mt, and has yet to move out of its recent range.


Lead: Three-month LME lead rebounded sharply on Tuesday, climbing to an intraday high of $1,860/mt before closing the trading day 2.5% higher at $1,848/mt. Tuesday’s rally came after LME lead plumbed its lowest in three years and a half at $1,790.5/mt on Monday, indicating strong support at $1,800/mt. LME lead may stabilise in the near term, hovering in a wide range around $1,850/mt.


Tin: Three-month LME tin reversed earlier gains to an intraday low of $16,340/mt on Tuesday, before it recovered some ground to end the trading day 0.18% firmer at $16,515/mt, sitting around the five-day moving average. Resistance lies at $16,700/mt, while support is at $16,300/mt.

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