SMM Evening Comments (Mar 19): Shanghai base metals fell across the board for the second day amid virus-related sell-off

SHANGHAI, Mar 19 (SMM) – SHFE nonferrous metals extended declines across the board on Thursday, in a broad sell-off amid renewed fears about the hit to global demand from the coronavirus. 

Copper fell to its daily limit for the second consecutive day, losing 9% on Thursday, as the metal is seen by investors as a gauge of economic health. Scheduled output controls at some copper mines failed to lend support to the prices. 

Tin also plunged the maximum daily limit of 9%. Aluminium lost 5.41%, lead shed 2.89%, zinc slumped 4.85%, and nickel dipped 2.56%. 

More areas in the Philippines have banned vessels from entering amid the COVID-19 outbreak, and this grew concerns about nickel ore supply as the country is the world’s largest exporter of the raw material for stainless steel and nickel pig iron (NPI).

The ferrous complex was also in the red, as rebar eased 0.9%, hot-rolled coil dropped 1.72%, stainless steel slid 1.69%, coke slipped 2.24%, while iron ore went flat. 

The SHFE has suspended night trading session until further notice.

Copper: The most-liquid SHFE May contract dived quickly to 37,570 yuan/mt, hitting its “limit-down” right after the opening of the Thursday session, as widespread panic drove investors to cover long positions. Open interest shrank 4466 lots to 119,000 lots. All SHFE copper contracts saw an accumulative 1.04 billion yuan of capital outflow today, topping base metals. Bearish sentiment amid expectations of a global recession may continue to depress copper prices. 

Aluminium: The most-traded SHFE May contract slipped to its lowest level since January 2016 at 11,730 yuan/mt, before it finished the session at 11,805 yuan/mt. Average losses at primary aluminium smelters have widened to 1,700 yuan/mt, while large-scale output cuts have not been heard. There are further downside risks in prices amid bearish macroeconomic sentiment. 

Zinc: The most-traded SHFE May contract struggled around 14,245 yuan/mt and trimmed some losses to end at 14,420 yuan/mt. The steep declines in zinc prices further squeezed profit at mines and raised the possibility of output cuts. Given costs at mines, the downsides in zinc prices could be limited.

Nickel: The most-active SHFE June contract rebounded after dipped to a session low of 90,600 yuan/mt as investors cut their short positions in the afternoon. It closed the day 2.56% lower at 95,250 yuan/mt. Support from 90,000 yuan/mt will be closely monitored. 

Lead: The most-traded SHFE May contract recovered slightly after declined, and ended the session 2.89% lower at 12,945 yuan/mt. Open interest lost 1,042 lots to 28,738 lots as longs departed.

Tin: The most-active SHFE June contract plunged a maximum 9% on the day to 108,190 yuan/mt on the backdrop of exiting longs. Weakened LME tin overnight also dampened market confidence. Support below is seen from 102,000 yuan/mt in the short term.