SMM Morning Comments (Mar 13): Shanghai base metals extended losses as coronavirus fears spread

SHANGHAI, Mar 13 (SMM) – SHFE nonferrous metals opened lower across the board on Friday, extending declines from the previous day, as investors panicked after the coronavirus pandemic roiled financial markets and fanned fears of a recession. 

US stocks tumbled more than 9% on Thursday, with Wall Street extended its dramatic slide into a bear market as the Dow, S&P 500 and Nasdaq all crashed in response to the global coronavirus crisis.

LME base metals fell across the board on Thursday, with nickel leading the losses with a plunge of 4.58%. Copper shed 1.33%, aluminum eased 0.63%, zinc fell 1.91%, lead fell 0.11%, and tin slipped 4.38%. The SHFE night trading session remained suspended to contain the spread of the virus.

Copper: Three-month LME copper slipped to a session low of $5,376.5/mt and ended 1.33% lower on the day at $5,435/mt. Oil prices drifted lower by more than 8% on the back of an inflow of cheap supplies from Saudi Arabia and the United Arab Emirates. Risk aversion and the oil price crash will likely keep copper prices under pressure in the near term. Today, LME copper is likely to trade between $5,360-5,420/mt with the most-liquid SHFE contract at 43,000-43,500 yuan/mt. 

Aluminium: Escalation in the development of COVID-19 pandemic overseas sent LME three-month aluminium to a session low of $1,652/mt, before it ended down 0.63% on the day at $1,661.5/mt. LME aluminium is likely to face continued pressure and trade between $1,640-1,690/mt today, with the most-active SHFE contract trading at 12,600-12,900 yuan/mt. 

Zinc: Three-month LME zinc declined 1.91% overnight to finish at $1,947/mt, after falling to an intraday low of $1,931/mt. Support remained from the Bollinger lower band. LME zinc inventories shrank 325 mt, or 0.43% on Thursday to 74,900 mt. Trading range today is expected at $1,930-1,980/mt today with the most-traded SHFE contract hovering between 15,500-16,000 yuan/mt. 

Nickel: Three-month LME nickel broke below $12,000/mt to hit an intraday low of $11,735/mt, plunging 4.58% on the day to finish at $11,880/mt. It had returned to the levels of July 2019 and may recover some lost ground today. Resistance from $12,000/mt will be monitored today. 

Lead: Three-month LME lead extended its decline as base metals weakened across the board on fears about the COVID-pandemic and its impact on the global economy. It finished the session 0.11% lower at $1,765/mt, after slipped to an intraday low of $1,738.5/mt. The downside room could be expanded given an absence of support below. 

Tin: Three-month LME tin fell steeply to an intraday low of $15,915/mt before it pared some losses and ended at $16,065/mt, down $735/mt on the day. Support below is seen from $16,000/mt.