SMM Morning Comments (Feb 27): Most Shanghai base metals extended declines on Thursday morning

SHANGHAI, Feb 27 (SMM) – SHFE nonferrous metals opened lower for the most part on Thursday, extending declines from the previous day, as concerns about a wider coronavirus outbreak extended selloff. 

LME base metals fell for the most part on Wednesday with lead leading the losses and dipping 1.5%. Copper and nickel shed 0.3%, tin lost 0.2%, aluminium went flat, while zinc gained 0.3%. The SHFE night trading session remained suspended to contain the spread of the virus.

Copper: Three-month LME copper extended its decline on Wednesday as the coronavirus outbreak outside China continued to depress market sentiment and LME copper inventories surged 61,175 mt, the biggest increase since 2004. LME copper closed down 0.32% on the day at $5,660.5/mt. Weak demand in top consumer China has driven up inventories of seaborne copper, which may keep prices of the red metal under pressure in the short term. Today, LME copper is seen trading between $5,640-5,700/mt with the most-liquid SHFE contract at 45,500-45,900 yuan/mt. Spot discounts are likely at 200-260 yuan/mt as sellers destock. 

Aluminium: Three-month LME aluminium went flat overnight, ending at $1,702/mt after slipped to a session low of $1,690/mt. LME aluminium inventories extended their slide, which coupled with better-than-expected US new home sales data, underpinned aluminium prices. However, the negative impact of COVID-19 will keep a lid on the upside, which may see LME aluminium between $1,680-1,720/mt today, with the most-active SHFE contract at 13,400-13,700 yuan/mt. 

Zinc: Three-month LME zinc climbed to an intraday high of $2,067/mt on the back of loaded-up longs, before it trimmed some gains and finished the day 0.32% higher at $2,044/mt. While LME zinc inventories added 775 mt to 75,975 mt, improvement in the resumption of downstream operations and the recovery of logistics in China supported zinc prices. LME zinc is likely to hover at $2,020-2,070/mt today with the most-traded SHFE contract at 16,400-16,900 yuan/mt. 

Nickel: Three-month LME nickel regained some losses as it rallied after slipped to a session low of $12,360/mt, ending down 0.28% on the day at $12,490/mt. Pressure above from the five-day moving average will be monitored. 

Lead: Downbeat economic outlook for 2020 amid the fast-spreading virus outbreak depressed three-month LME lead, which led the declined among LME base metals on Wednesday, closing down 1.46% at $1,823/mt.