SMM Evening Comments (Mar 11): Shanghai base metals mostly pulled back as coronavirus, oil prices remained in focus

SHANGHAI, Mar 11 (SMM) – Prices of copper, aluminium nickel and lead on the Shanghai Futures Exchange fell on Wednesday, erasing gains from Tuesday’s rally, as investors continued to watch the spread of the coronavirus and oil prices.

Oil prices pared their earlier gains, indicating that their rally appeared to run out of steam as investors remained pessimistic.

Lead shed 1.2% on the day to be the biggest loser among SHFE base metals, copper slipped 0.6%, nickel lost 0.5% and aluminium sank 0.3%. Zinc and tin held their gains from the broad rebound in the previous session, climbing 0.6% and 0.3% on the day, respectively.

Base metals on the London Metal Exchange, except for zinc, traded lower as of 18:02 Beijing time.

The Bank of England (BOE) on Wednesday morning London time announced an emergency cut to interest rates in an attempt to limit the economic impact from the new coronavirus. The central bank lowered its main interest rate from 0.75% to 0.25% and announced a new term-funding scheme to support small and medium-sized businesses, along with measures to help commercial banks lend more.

The SHFE has suspended night trading session until further notice.

Copper: The most-traded SHFE 2005 contract dropped in afternoon trade to end at 44,290 yuan/mt, after hovering around the daily moving average at 44,600 yuan/mt in morning trade. It is expected to try to hold above 44,000 yuan/mt and pressure at moving averages is likely to deter the contract from rebounding in the short term

Aluminium: The most-active SHFE 2005 contract eased to end at 12,935 yuan/mt. SHFE aluminium is expected to remain weak in the short term as the coronavirus spreads outside China.

Zinc: The buildup of long positions took the most-liquid SHFE 2005 contract to a one-week high of 16,160 yuan/mt, before the contract eased to end the day higher at 16,010 yuan/mt. Persisting risks of oversupply are expected to keep the contract from shrugging off resistance at the 10-day moving average in the short term.    

Nickel: The unwinding of long positions sent the most-traded SHFE 2006 contract below the five-day moving average. The contract finished the day at 102,350 yuan/mt, standing above the 10-day moving average. Investors diverged recently, and whether the contract can remain above the 10-day moving average will come under scrutiny in the near term.

Lead: The most-liquid SHFE 2005 contract retreated to end at 14,315 yuan/mt, its lowest close in more than a week.

Tin: The most-traded SHFE 2006 contract reversed an earlier slip to end the day in the green at 135,660 yuan/mt. The contract is currently supported by the 10-day moving average, while resistance is seen at 137,500 yuan/mt.