SMM Evening Comments (Mar 5): Shanghai base metals mostly higher on support measures

SHANGHAI, Mar 5 (SMM) – Shanghai base metals closed mostly higher on Thursday, recouping some losses from the previous session, as market sentiment was improved by the IMF’s aid package and interest rate cuts from central banks aimed at countering the economic fallout from the COVID-19 epidemic outbreak.

Gains in prices, however, were limited by lingering concerns about the epidemic as the outbreak outside China is deepening.

US Federal government announced an $8 billion spending package on Wednesday to help combat the spread of the coronavirus, while the International Monetary Fund (IMF) also unveiled a $50 billion aid program.

That came after a series of rate cuts from central banks this week, including the US Federal Reserve and the Reserve Bank of Australia.

Investors are now waiting to see whether the European Central Bank would also announce new stimulus, with eurozone markets pricing in a 90% chance of deposit rate reduction next week.

On the Shanghai Futures Exchange, zinc rose 0.8%, tin climbed 0.7%, nickel advanced 0.6%, aluminium gained 0.2% and copper inched up 0.1%, while lead fell 0.6%. Base metals on the London Metal Exchange moved higher across the board.

The SHFE has suspended night trading session until further notice.

Copper: The most-traded SHFE 2004 contract remained rangebound and ended at 45,320 yuan/mt. The contract struggles to climb, and faces stiff pressure at the 20-day moving average. Whether it could hold above 45,000 yuan/mt will come under scrutiny in the short term.  

Aluminium: The most-active SHFE 2005 contract hovered in a tight range and closed at 13,245 yuan/mt. SMM data showed that social inventories of primary aluminium ingots in China extended gains as expected, while downstream demand is improving on the re-opening of factories. SHFE aluminium is expected to remain at lows without a direction.  

Zinc: The most-liquid SHFE 2005 contract rebounded to the 16,100 yuan/mt level and closed at 16,095 yuan/mt. It is expected to be stuck in the current range in the absence of positive signals on fundamentals.  

Nickel: The most-traded SHFE 2006 contract reversed an early slip, surpassing the 20-day moving average to an intraday high of 104,160 yuan/mt. It later retreated below the 20-day moving average and ended at 103,400 yuan/mt. The contract remains between the 10- and 20-day moving averages.

Lead: The most-liquid SHFE 2004 contract failed to recover from a lower open and ended at 14,430 yuan/mt. It extended its decline and bucked the uptrend across nonferrous metals as support from fundamentals waned after more secondary lead smelters reopened. But continued tightness in battery scrap supply that will prevent secondary lead smelters from recovering production, will limit downside room in lead prices.

Tin: The most-traded SHFE 2006 contract extended its rally to a one-month high of 137,560 yuan/mt in early morning trade, before it erased some gains to end at 136,760 yuan/mt. Resistance is seen at 137,500 yuan/mt, while support is at 135,000 yuan/mt.