SMM Morning Comments (Feb 28): Shanghai base metals extended declines on Friday morning

SHANGHAI, Feb 28 (SMM) – SHFE nonferrous metals opened lower across the board on Friday, extending declines from the previous day, as coronavirus pandemic fears flared amid rising confirmed cases outside China. 

LME base metals declined across the board on Thursday, with tin leading the losses and dipping 2.2%. Zinc and nickel fell 0.9%, aluminium lost 0.7%, lead slid 0.4%, and copper shed 0.1%. The SHFE night trading session remained suspended to contain the spread of the virus.

Copper: Three-month LME copper recovered after declined to a session low of $5,574.5/mt, ending down 0.08% on the day at $5,656/mt, as fears of a potential coronavirus pandemic continued to hit markets. Trading range is expected at $5,600-5,660/mt today with the most-traded SHFE contract at 45,000-45,500 yuan/mt. Spot discounts are likely at 170-140 yuan/mt as downstream enquiries improved on expectations of a demand pickup in March. 

Aluminium: Three-month LME aluminium slipped to the lowest level in three years at $1,682.5/mt before it closed 0.68% lower on the day at $1,690.5/mt. While LME aluminium inventories extended slide and the US dollar softened, prices of the base metals will remain under pressure before the epidemic is contained. Today, LME aluminum is expected to trade at $1,670-1,710/mt with the most-traded SHFE contract at 13,300-13,600 yuan/mt. 

Zinc: Three-month LME zinc retreated after climbed to an intraday high of $2057/mt, dipping to the lowest level on the day at $2005/mt and closed down 0.91% at $2,025.5/mt. Investors flocked to safety amid growing concerns about the deadly coronavirus, which weighed on base metals prices. LME zinc inventories continued to shrink 550 mt to 75,425 mt. This, coupled with improvement in the recovery of zinc downstream producers in China, is likely to underpin prices at $2,010-2,060/mt today. The most-traded SHFE contract is seen at 16300-16800 yuan/mt today. 

Nickel: Three-month LME nickel stemmed decline at $12,285/mt given support from the Bollinger lower band. It closed down 0.88% on the day at $12,380/mt. Support below from the Bollinger lower band will continue to be monitored today. 

Lead: Three-month LME lead relinquished gains in early session after climbed to an intraday high of $1,832/mt. It ended down 0.38% on the day at $1,816/mt. Intensified risk aversion on the coronavirus outbreak will keep investors cautious today. 

Tin: Three-month LME tin fell significantly last night as it slumped to a session low of $16,180/mt and finished the day $365/mt lower at $16,325/mt. Support below is expected from $16200/m today.