SMM Morning Comments (Mar 25): Base metals mixed following a historic rebound on Wall Street; Shanghai copper extended its gains

SHANGHAI, Mar 25 (SMM) – Shanghai base metals opened mostly higher in early morning trade on Wednesday following dramatic gains overnight on Wall Street as investors await the announcement of an unprecedented stimulus package aimed at combating the economic impact of the coronavirus by US lawmakers.

Hopes for the huge US fiscal stimulus package, together with the US Federal Reserve’s offer of unlimited bond-buying, supported risk sentiment for the past day, bolstering stocks and oil prices while depressing the US dollar.

Overnight on the LME, base metals, except for aluminium and lead, closed higher. Copper surged 5.4% on the day to lead the gains, nickel jumped 3.3%, tin advanced 1.6% and zinc rose 0.6%.

The SHFE kept its night trading session suspended.

Worries about the economic fallout from the pandemic, and still-elevated demand for greenbacks in cash are expected to continue to weigh on base metals.

Copper: Three-month LME copper hit an intraday high of $4,929.5/mt in North American trading hours, before it eased slightly to end the day sharply higher at $4,848/mt, its highest close in a week. LME copper is expected to move between $4,840-4,900/mt today, with its SHFE counterpart at 38,100-38,600 yuan/mt. Spot discounts are seen at 50-20 yuan/mt, as traders remain keen to sell futures and buy spot cargoes.

Aluminium: Three-month LME aluminium weakened in a volatile trading session and ended at $1,554.5/mt. It faces stiff resistance at the lower Bollinger band. LME aluminium is expected to hover between $1,540-1,600/mt today, with the most-active SHFE 2005 contract trading at 11,400-12,000 yuan/mt. East China spot discounts are seen narrower at 60-40 yuan/mt against the SHFE 2004 contract.

Zinc: Three-month LME zinc strengthened in a volatile trading session and ended at $1,828/mt. It has not broken pressure at the five- and 10-day moving averages yet. Despite a rally in US stocks, oversupply on the fundamentals front will weigh on zinc prices. LME zinc is expected to trade at $1,790-1,840/mt today with the most-traded SHFE May contract hovering between 14,500-15,000 yuan/mt. Spot premiums for domestic 0# Shuangyan are seen unchanged at 20-40 yuan/mt over the SHFE April contract.

Nickel: Three-month LME nickel reversed an earlier slip to end the day substantially higher at $11,280/mt. LME nickel has returned above the five-day moving average, but faces resistance at $11,300/mt.

Lead: Three-month LME lead dived to an intraday low of $1,580.5/mt in North American trading hours, near the low in the previous day, after hovering in a tight range around $1,636/mt earlier in the day. It later recouped some losses to end the day lower at $1,608/mt. While funding strains eased and US stocks rebounded, LME lead is likely to weaken further, as the pandemic outbreak outside China is not under control yet.

Tin: Three-month LME tin climbed above the five-day moving average to an intraday high of $13,925/mt in European trading hours, before it erased some gains to close the day higher at $13,395/mt. Resistance is seen at $14,000/mt.