SMM Evening Comments (Mar 12): Shanghai base metals dropped on mounting virus fears

SHANGHAI, Mar 12 (SMM) – Shanghai base metals closed broadly lower on Thursday, as stimulus measures by central banks failed to ease worries about the economic impact of the coronavirus outbreak.

Fears of economic fallout from the virus escalated and global markets took a hit after US President Donald Trump on Wednesday announced the suspension of all travel from Europe, except from the UK, to the US for 30 days.

The World Health Organization on Wednesday declared the COVID-19 viral disease that has swept into at least 114 countries and killed more than 4,000 people a pandemic.

On the Shanghai Futures Exchange, nickel shed 2.6% on the day to lead the losses across nonferrous metals, copper tumbled 2.5%, zinc plunged 1.5%, tin dropped 1.2%, lead slipped 1.1%, and aluminium lost 0.7%. Base metals on the London Metal Exchange also moved lower across the board.

The SHFE has suspended night trading session until further notice.

Copper: The most-traded SHFE 2005 contract extended losses from a lower open to its lowest in 40 months at 43,180 yuan/mt in morning trade, before it recovered some ground to end at 43,450 yuan/mt. Copper prices are unlikely to stage a substantial rally before there is evidence of containment of COVID-19 globally. Whether the contract could hold above 43,000 yuan/mt will come under scrutiny in the short term.

Aluminium: The most-active SHFE 2005 contract eased to its lowest since January 2017 at 12,825 yuan/mt in morning trade, and recovered some ground in afternoon trade to close the day at 12,870 yuan/mt. SMM data showed that social inventories of primary lead ingots in China continued to trend higher this week.

Zinc: The buildup of short positions took the most-liquid SHFE 2005 contract to an intraday low of 15,795 yuan/mt in early morning trade. The contract later recovered somewhat, before it turned lower, back towards the intraday low, and ended at 15,835 yuan/mt.  

Nickel: The most-traded SHFE 2006 contract opened lower and slipped below the 100,000 yuan/mt mark in early morning trade. It later recouped some losses and hovered in a tight range to end the day at 100,560 yuan/mt. Whether the contract can remain above 100,000 yuan/mt will come under scrutiny in the near term.

Lead: The most-liquid SHFE 2005 contract slipped to an intraday low of 14,180 yuan/mt in early morning trade, before it clawed back some losses to close at 14,250 yuan/mt. Temporary tightness in lead supply is expected to limit downside room in SHFE lead.

Tin: The most-traded SHFE 2006 contract pulled back, erasing gains from the previous two sessions, and finished the day at 133,990 yuan/mt.