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SMM Evening Comments (Feb 14): Shanghai base metals mostly higher as investors continued to monitor COVID-19 developments
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Feb 14,2020

SHANGHAI, Feb 14 (SMM) – Most nonferrous metals on the SHFE closed higher on Friday, as investors continued to monitor the coronavirus epidemic outbreak in China.

Lead added 1.6% to lead the gains, zinc rose 0.6%, copper climbed 0.5%, tin edged up 0.02%, while aluminium dipped 0.1% and nickel dropped 1%.


Henan Yuguang Gold and Lead, one of China's biggest lead and zinc producer, said on Thursday that it is cutting its zinc output by 50% as it is running out of storage capacity for sulphuric acid. This came after it trimmed output of lead ingots earlier this month.

The news of production cuts lifted SHFE zinc to a one-week high, and lead to a two-week peak shortly before closing bell.


The ferrous complex traded mixed. Stainless steel pulled back 1.9%, rebar and coke edged down 0.03%, while coking coal gained 0.2%, hot-rolled coil increased 0.3% and iron ore advanced 1%.


China was set to halve tariff rates on certain US products worth about $75 billion with effect on Friday, as previously announced by Beijing in early February.


China’s National Health Commission on Friday reported an additional 121 deaths and 5,090 new cases of the coronavirus across the mainland for February 13. The number of new cases outside of the epicentre of Hubei, continued to fall.


On the data front, eurozone economic growth slowed as expected in the last three months of 2019 as gross domestic product shrank in France and Italy against the previous quarter, but employment growth picked up more than expected, official estimates showed on Friday.

The European Union’s statistics office Eurostat said GDP in the 19 countries sharing the euro expanded 0.1% quarter on quarter in the October-December period, to produce a 0.9% year-on-year gain. Growth in Germany, the biggest euro zone economy, stagnated.

Eurostat also said that eurozone employment rose 0.3% quarter on quarter in the fourth quarter of 2019 for a 1% year-on-year gain.


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


With downstream consumers in China gradually resuming operations, demand for base metals is set to recover further next week, which will offer some support to prices.  


Copper: The most-traded SHFE 2003 contract opened sharply higher this morning, and hovered around the daily moving average in the rest of the session. It finished the day 0.48% higher at 45,930 yuan/mt. Gains in copper prices were limited by concerns about demand, as limited copper processors resumed operations this week. Data showed that copper stocks across SHFE warehouses increased 56,000 mt in the week.  


Aluminium: The SHFE 2004 contract erased earlier gains to an intraday low of 13,695 yuan/mt in morning trade, before it clawed back some losses to end the day fractionally lower at 13,720 yuan/mt. SHFE aluminium has fallen for three consecutive days.


Zinc: Tracking overnight gains in its LME counterpart, the most-liquid SHFE 2004 contract strengthened during the day, hitting its highest since February 7 at 17,235 yuan/mt before closing up 0.61% at 17,225 yuan/mt. Today’s gain helped SHFE zinc recoup some losses from the slip earlier in the week, sparked by significantly higher inventories amid muted consumption.


Nickel: The most-traded SHFE 2004 contract notched its highest since the market reopened following the CNY holiday at 107,050 yuan/mt in early morning trade, before it tumbled to close the day 0.97% lower at 104,650 yuan/mt.    


Lead: Bullish funds bolstered the most-liquid SHFE 2004 contract to its highest since February 3 at 14,430 yuan/mt, before the contract finished the day 1.55% higher at 14,405 yuan/mt. SHFE lead was on a tear this week, registering a weekly gain of more than 2%. It may struggle to stand above the 20-day moving average next week, as its LME counterpart retreated in European trading hours.


Tin: The most-traded SHFE 2006 contract fluctuated to end the day a tad higher at 134,600 yuan/mt. SHFE tin remained its recent range.

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