SMM Evening Comments (Mar 9): Shanghai base metals slumped amid oil price war

SHANGHAI, Mar 9 (SMM) – Prices of copper, aluminium and other industrial metals fell sharply on Monday, as oil prices plunged after the collapse of OPEC talks sparked fears of an all-out price war.

The world’s top exporter, Saudi Arabia, vowed to cut prices and raise its production significantly, after OPEC failed to strike a deal with its allies on production cuts last week.

US crude futures prices sank more than 20% on Monday, global stocks tumbled, and base metals opened sharply lower across the board.

On the Shanghai Futures Exchange, copper shed 3.6% on the day to lead the losses across nonferrous metals, zinc dropped 3%, copper declined 2.7%, aluminium sank 2.1%, tin fell 2%. Lead bucked the trend and edged up 0.03% on the day, underpinned by positive fundamentals.

Base metals on the London Metal Exchange moved broadly lower.

The SHFE has suspended night trading session until further notice.

Copper: The most-traded SHFE 2004 contract hovered in a tight range between 43,630-43,850 yuan/mt, around the daily moving average, after a lower open, and ended at 43,750 yuan/mt. SHFE copper refreshed its lowest in more than three years, and is likely to return above 44,000 yuan/mt in the short term after investors digest the OPEC news. Upside in copper prices, however, is set to be limited by concerns over the widening reach of the coronavirus.  

Aluminium: The most-active SHFE 2005 contract slipped to its lowest since January 2017 at 12,830 yuan/mt in afternoon trade, before it recouped some losses to end at 12,890 yuan/mt.

Zinc: The most-liquid SHFE 2005 contract fell by its daily limit to its lowest since June 2016 at 15,235 yuan/mt in early morning trade, before it recovered some ground and hovered in a tight range to end at 15,565 yuan/mt. Weak fundamentals made SHFE zinc vulnerable to negative macro developments. Prices are unlikely to recover from today’s sharp loss in the near term, as bearishness prevails across the market.

Nickel: The most-traded SHFE 2006 contract extended losses from a lower open to end at 99,610 yuan/mt, moving back towards the more than seven-month trough of 98,940 yuan/mt plumbed on the last trading day of February. Whether it could hold above 98,000 yuan/mt will come under scrutiny in the near term.

Lead: The most-liquid SHFE 2005 contract recovered losses from the lower open to end a tad higher at 14,445 yuan/mt. Lead was the only one closing the day in the green among nonferrous metals, thanks to its positive fundamentals. Trades in the physical market were brisk and prices were in premiums.

Tin: The most-traded SHFE 2006 contract oscillated around the daily moving average after opening the day lower. It touched a one-week low of 132,870 yuan/mt before closing at 133,240 yuan/mt. Today’s plunge sent SHFE tin below all near-term moving averages. Immediate support is seen at 133,000 yuan/mt, with next support at 131,500 yuan/mt.