SMM Evening Comments (Mar 18): Shanghai base metals plunged on intensified virus panic

SHANGHAI, Mar 18 (SMM) – SHFE nonferrous metals fell across the board on Wednesday, extending losses on Tuesday on the backdrop of sustained virus-related panic, and the market appeared to be unimpressed by the US planned stimulus package for stabilising the economy. 

Rising global coronavirus cases continued to threaten some of the world’s major economies and expanded downsides of base metals. 

SHFE copper, lead and tin fell to their daily limit of 6% on Wednesday. Aluminium shed 3.49%, zinc lost 4.92%, and nickel fell 4.51%. 

The ferrous complex, meanwhile, ended mixed as iron ore added 1.65% on supply concerns as miners were required to reduce operations in response to the COVID-19 outbreak. Rebar gained 0.06%, while hot-rolled coil eased 0.52%, stainless steel slipped 1.03%, and coke lost 1%. 

The SHFE has suspended night trading session until further notice.

Copper: The most-liquid SHFE May contract hovered steadily around 41,660 yuan/mt on the morning of Wednesday before it dived below 40,000 yuan/mt, falling a maximum 6% on the day and ending at 39,960 yuan/mt. Shorts aggressively loaded up their positions, driving up open interest across all SHFE copper contracts by 8,775 lots. Fears about a further escalation in the virus development globally may keep near-term prices of copper under pressure. The most-active SHFE contract may struggle to hold above 39,000 yuan/mt. 

Aluminium: The most-liquid SHFE May contract declined to the lowest level since October 2017 and closed down 3.49% on the day at 12,300 yuan/mt amid intensified risk aversion as COVD-19 cases surged overseas. While the virus impact on domestic production has waned, a delay in the recovery of end-user demand failed to offer support to aluminium prices. A falling market grew losses at aluminium smelters and may trigger potential production cuts. 

Zinc: The most-active SHFE May contract accelerated its decline in the afternoon and diverged from all moving averages to close 4.98% lower on the day at 14,880 yuan/mt. While production resumed at a rapid rate in China as new COVID-19 case numbers stabilised, growing virus risks overseas may cap any upward momentum in near-term zinc prices. 

Nickel: The most-traded SHFE June contract traded lower with other base metals in the afternoon session, hitting the lowest level in nearly 10 months of 94,950 yuan/mt and ending down 4.51% on the day at 95,050 yuan/mt. The prices have returned to the levels in July 2019, erasing all the gains driven by the advanced nickel ore export ban from Indonesia. Weak support is seen from fundamentals and LME nickel is also in a downward trend. 

Lead: The most-active SHFE May contract fell to its 6% daily limit near closing, ending at 13,075 yuan/mt, as bearish positions dominated the market. Investors should remain cautious about the development on the macro side, whose impact has outweighed that of fundamentals. 

Tin: The most-liquid SHFE June contract followed its LME counterpart lower, dipping to its daily limit of 6% to a low of 117,390 yuan/mt amid aggressively loaded-up short positions. It remained below all moving averages with support expected from 113,000-115,000 yuan/mt.