Metals News
SMM Evening Comments (Feb 26): Shanghai base metals mostly fell as virus fears mounted; copper hovered at 2-week lows
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Feb 26,2020

SHANGHAI, Feb 26 (SMM) – Most of base metals on the Shanghai Futures Exchange weakened on Wednesday, as concerns over the economic impact from the COVID-19 coronavirus outbreak grew on the back of another jump in new cases in South Korea.


Authorities in South Korea reported 169 new infections, taking the overall tally to 1,146, by far the largest outside China. Confirmed cases in Japan, Iran, Italy and the US also grew.


In China, the number of new cases declined, but end-user consumption struggled to recover due to the virus containment measures—travel and transportation restrictions.


The World Health Organization warned earlier this week that the new coronavirus has peaked in China but could still grow into a pandemic.


China's central bank said on Wednesday it is cutting re-lending interest rates for small business or agricultural borrowers by 25 basis points as part of the efforts to support small and micro companies amid the virus outbreak. That comes along with an increase of 500 billion yuan in the refinancing and rediscounting quota.


Asian stocks continued to pull back on Wednesday following overnight losses on Wall Street, while gold prices steadied around seven-year highs.


On the SHFE, nickel plunged 1.5% to lead the losses, tin and copper fell more than 0.5%, zinc shed 0.4%, and aluminium dipped less than 0.1%. Lead gained more than 0.1%. Meanwhile, London Metal Exchange base metals, except for zinc, turned lower.


The SHFE has suspended night trading session until further notice.


Copper: The most-traded SHFE 2004 contract extended losses from a lower open to its lowest since February 10 at 45,570 yuan/mt in afternoon trade. It finished the day 0.52% lower at 45,630 yuan/mt. SHFE copper has fallen to two-week lows, and whether it could remain above 45,500 yuan/mt will come under scrutiny tomorrow.


Three-month LME copper dropped after the release of data showed that copper stocks across LME-approved warehouses increased more than 60,000 mt, or 38.17% to 221,425 mt as of February 26, marking the biggest one-day gain since 2004.


Aluminium: The most-active SHFE 2004 contract erased earlier gains to end the day 0.07% weaker at 13,490 yuan/mt. SHFE aluminium is expected to remain weak and rangebound in the short term, as consumption recovers slowly.  


Zinc: The most-liquid SHFE 2004 contract slipped to a new record low of 16,370 yuan/mt in afternoon trade, before it recovered some ground to close the day 0.42% lower at 16,455 yuan/mt. SHFE zinc extended its decline as recovering consumption has yet to turn the market to be demand and supply balanced.


Nickel: The most-traded SHFE 2004 contract tumbled, falling to 100,670 yuan/mt, a low hit on the first trading day after the Lunar New Year holiday, before closing the day 1.53% lower at 100,680 yuan/mt. The contract moved further away from the five-day moving average, to the lower Bollinger band. Support at 100,000 yuan/mt will come under scrutiny in the near term.


Lead: The most-liquid SHFE 2004 contract boomeranged, coming off from an intraday high of 14,620 yuan/mt to an intraday low of 14,500 yuan/mt, before returning to positive territory to close the day 0.14% firmer at 14,560 yuan/mt. SHFE lead held to recent highs, bucking the downtrend across nonferrous metals, as 14,500 yuan/mt offered strong support and as many secondary lead smelters in China remained shut.  


Tin: SHFE tin retreated from a peak for February, shedding 0.54% on the day to end at 135,900 yuan/mt, as shorts added positions. Support is seen at the 20-day moving average at 135,000 yuan/mt. 

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