SMM Morning Comments (Feb 19): Shanghai base metals opened mostly higher on Wednesday 

SHANGHAI, Feb 19 (SMM) – Most SHFE nonferrous metals continued to trade higher on Wednesday morning, extending the increase from the previous day. The Chinese government urges the efforts to ensure the orderly resumption of production by companies to contain the economic impact of a novel coronavirus outbreak.

LME base metals fell for the most part last night. Nickel lost 2%, zinc fell 1.5%, tin slipped 1.1%, copper shed 1%, while aluminium added 0.3%, and lead grew 0.8%. The SHFE night trading session remained suspended.

Copper: Three-month LME copper declined on Tuesday as inventory buildup raised fears of weaker demand from top consumer China on the back of the COVID-19 outbreak. Downbeat economic sentiment index from the eurozone grew risk aversion of investors, which also weighed on prices of the red metal. As the market awaits the resumption of downstream demand, LME copper is expected to trade between $5,750-5,810/mt today with the most-liquid SHFE contract at 46,000-46,400 yuan/mt. Spot discounts are seen at 210-150 yuan/mt. 

Aluminium: Three-month LME aluminium recovered on Tuesday, ending up 0.26% on the day at $1,721.5/mt, but the increase remained capped by a strengthened US dollar. The Chinese government encourages the resumption of companies, but the recovery of demand from end-users remains limited. The most-traded SHFE contract is seen between 13,600-13,800 yuan/mt today, with LME aluminium at $1,710-1,750/mt. 

Zinc: Limited upward momentum saw three-month LME zinc stemming its increase at $2,173/mt and ended the day 1.47% lower at $2,143.5/mt, given pressure from the 10-day moving average. LME zinc inventories shrank 25 mt to 74,700 mt. In the domestic market, most galvanising producers have resumed operations, despite low operating rates. Production cuts at some smelters on the back of inventory pressure of sulphuric acid will limit any downside room in zinc prices. Today, LME zinc is expected to trade between $2,130-2,190/mt, with the most-traded SHFE contract at 17,100-17,500 yuan/mt. 

Nickel: Three-month LME nickel fell to the lowest in nearly two weeks at $12,800/mt and finished the day 2.28% lower at $12,855/mt. Open interest lost 4,944 lots to 267,029 lots. Pressure from the Bollinger middle band will be watched today. 

Lead: A backwardation structure buoyed three-month LME lead, which rebounded from a low of $1,846/mt and closed up 0.8% on the day at $1,887/mt. Pressure above from $1,900/mt will be monitored today. 

Tin: Three-month LME tin declined from a high of $16,800/mt after tin inventories across LME-listed warehouses added 930 mt to 7,485 mt. LME tin closed the session $185/mt lower on the day at $16,430/mt. Support below is seen from $16,300/mt.