SMM Morning Comments (Feb 24): Shanghai base metals opened lower on Monday

SHANGHAI, Feb 24 (SMM) – SHFE nonferrous metals opened mostly lower on Monday as the spread of coronavirus raised worries that global economic growth could take a hit.

LME base metals fell for the most part last Friday, with lead leading the losses and closing down 1.6%. Nickel lost 1.3%, zinc slipped 0.6%, aluminium dipped 0.1%, while tin gained 0.2%, and copper advanced 0.5%. The SHFE night trading session remained suspended to contain the virus outbreak. 

Copper: Three-month LME copper advanced last Friday as the US dollar eased and posted the biggest decline in nearly two months, after headwinds from the novel coronavirus outbreak in China weighed on both the services and manufacturing sector in the US. Copper prices may face downward pressure today as the fast-spreading virus around the world dampens the global economic outlook. Today, three-month LME copper is seen trading at $5,700-5,760/mt with the most-liquid SHFE contract at 45,800-46,200 yuan/mt. Spot discounts are likely at 190-160 yuan/mt amid the overall slow recovery of demand. 

Aluminium: Three-month LME aluminium pared some losses after it broke down $1,710/mt, ending 0.06% lower on the day at $1,711/mt. A softened US dollar is expected to keep LME aluminium between $1690-1730/mt, and the most-traded SHFE contract between 13,400-13,700 yuan/mt. 

Zinc: Three-month LME zinc fell to a session low of $2,095/mt as rising coronavirus cases in overseas countries depressed confidence in longs. LME zinc lost 0.64% last Friday to close at $2,103/mt. LME zinc inventories shrank 50 mt to 75,425 mt. SMM retains the view that any downside room in zinc prices will be capped as smelters in China have cut production on the back of rising inventories of sulphuric acid and downstream demand will continue to recover. LME zinc is expected to trade between $2,080-2,130/mt today, with the most-traded SHFE contract at 16,950-17,450 yuan/mt. 

Nickel: Three-month LME nickel declined for the fourth consecutive session as it slipped to a two-month low of $12,500/mt and closed the day 1.33% lower at $12,570/mt. Support from $12,500/mt will be monitored today. 

Lead: Three-month LME lead relinquished gains from last week as it dropped to a session low of $1,828/mt before closed 1.61% lower on the day at $1,831.5/mt, on the back of intensified risk aversion amid coronavirus fears. Investors will remain cautious in the near term. 

Tin: Three-month LME tin edged higher as it recovered from an intraday low of $16,405/mt and ended $30/mt higher on the day at $16,595/mt. Pressure above is seen from $16,800/mt.