SMM Evening Comments (Mar 10): Shanghai base metals rebounded after global rout amid oil, virus fears; nickel jumped more than 4%

SHANGHAI, Mar 10 (SMM) – Shanghai base metals rose across the board on Tuesday, recovering from steep losses in the previous session, as falling coronavirus cases in China, Chinese President Xi Jinping's visit to the virus' epicentre, and hopes for more support measures lifted market sentiment from fears over an oil price war and the widening reach of COVID-19.

Oil prices also rebounded after suffering the sharpest loss since the 1991 Gulf War as Saudi Arabia launched a price war with Russia, jolting investors already worried about the coronavirus outbreak. Plunging oil prices sparked global rout that saw the S&P 500 falling more than 7% overnight and triggering a circuit breaker.

On the Shanghai Futures Exchange, nickel surged 4.2% to lead the gains across nonferrous metals, zinc jumped 3.7%, copper advanced 1.8%, tin climbed 1.4%, lead rose 0.7% and aluminium gained 0.5%. Their counterparts on the London Metal Exchange also moved broadly lower.

The SHFE has suspended night trading session until further notice.

Official data showed China’s producer prices swung back into deflation territory in February as the epidemic slowed economic activity, raising the prospect of more policy stimulus even as consumer inflation stayed elevated on high food costs.

US President Donald Trump said Monday he would seek a payroll tax cut and “very substantial relief” for industries that have been hit by the virus.

Copper: The most-traded SHFE 2004 contract kicked off the day with a higher open and hovered in a tight range around the daily moving average at 44,250 yuan/mt in morning trade. It climbed to an intraday high of 44,760 yuan/mt in afternoon trade, before easing to end at 44,540 yuan/mt. The contract for April delivery remained in discounts against the May contract, pointing to sufficient copper supply in the near future.

Aluminium: The most-active SHFE 2005 contract reversed an earlier slip to an intraday high of 13,045 yuan/mt in early afternoon trade. It later eased to end at 12,985 yuan/mt.

Zinc: Short-covering took the most-liquid SHFE 2005 contract to an intraday high of 16,115 yuan/mt in afternoon trade, before it erased some gains to end at 16,025 yuan/mt. SHFE zinc has clawed back almost all losses from Monday, but is expected to see limited further upside room as concerns about oversupply linger. Weak demand overseas dampens the prospects for zinc demand recovery.  

Nickel: As longs aggressively loaded up positions, the most-traded SHFE 2006 contract shrugged off resistance at the five-, 10- and 20-day moving averages to its highest in more than two weeks at 104,600 yuan/mt in afternoon trade, before finishing the day at 104,210 yuan/mt. Today’s sharp gain helped the contract stand above the middle Bollinger band. Continued weakness in fundamentals, however, is expected to keep SHFE nickel from moving far away from the 104,000 yuan/mt level. Inventories of stainless steel, the biggest consumer of nickel, remain high, forcing traders to discharge cargoes at low prices.  

Lead: The most-liquid SHFE 2005 contract oscillated around the daily moving average during the day, holding gains from a higher open and ending at 14,500 yuan/mt. The May contract is likely to face stiff resistance at the 40-day moving average, as fundamentals are expected to change in March and April.

Tin: The most-traded SHFE 2006 contract hit an intraday high of 136,500 yuan/mt in early afternoon trade, before it eased to close the day at 135,400 yuan/mt. Resistance is seen at the 60-day moving average and 137,500 yuan/mt.