SMM Morning Comments (Mar 30): Base metals broadly lower on pandemic concerns

SHANGHAI, Mar 30 (SMM) – London and Shanghai base metals cruised broadly lower in early morning trade on Monday, as investors continue to assess the economic impact of the global coronavirus pandemic that continues to spread rapidly.

Data compiled by Johns Hopkins University showed that the outbreak has already infected more than 720,000 worldwide and taken at least 33,925 lives. US President Donald Trump extended at a news conference Sunday the national social distancing guidelines to April 30.

Dismal economic data, which could shed some light on the fallout from the pandemic, released recently also dent investor sentiment.

With worsening pandemic furthering hurting demand and the Saudi Arabia-Russia price war showing no signs of abating, crude oil prices dropped in morning trade, extending last week’s losses, which also weighed on prices of base metals.

Trillions of dollars worth of stimulus efforts by governments and central banks, including a $2 trillion US package, to combat the economic impact from the coronavirus pandemic helped temper a rout in global markets last week. The Dow surged more than 12% to post its biggest weekly gain since 1938, while the US dollar staged its biggest weekly decline in four years.

On Friday, LME base metals, except for lead, closed higher. Tin surged more than 2% on the day to lead the gains, nickel jumped 1.8%, aluminium rose 0.8%, zinc advanced 0.5% and copper edged up 0.02%. Lead closed flat.

The SHFE kept its night trading session suspended.

Closures of some mines in response to virus containment measures by governments also offered some support to prices of some metals.

Copper: Three-month LME copper recovered from earlier losses to end Friday trading a tad higher at $4,815/mt, to post a weekly gain of close to 2.5%. The contract tumbled 13.8% in the previous week, the biggest weekly decline in almost a decade. LME copper is expected to trade between $4,720-4,800/mt today, with SHFE copper at 38,300-38,900 yuan/mt. Spot premiums are seen at 50-100 yuan/mt as month-end financial settlement will dent purchasing enthusiasm.

Aluminium: Three-month LME aluminium rallied on Friday, snapping a nine-day losing streak. It closed the day at $1,552.5/mt, and registered a weekly decline of 1.6%. LME aluminium is expected to move between $1,520-1,560/mt today, with the most-active SHFE 2005 contract trading at 11,270-11,950 yuan/mt. East China spot discounts are seen at 100-80 yuan/mt against the SHFE 2004 contract, as the 2004-2005 spread is likely to flip into backwardation.

Zinc: Three-month LME zinc hit a one-week high of $1,904/mt in early European trading hours, before it eased to hover around the daily moving average to end the day at $1,874/mt, marking the fourth straight day of gains. It jumped 1.6% on the week, after a drop of 6.9% in the previous week. Closures of zinc mines are likely to lend some support to zinc prices, but concerns about the destruction to demand will limit the upside room. LME zinc is expected to consolidate at lows in the short term and move at $1,850-1,900/mt today. The most-traded SHFE May contract is expected to trade at 14,800-15,300 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 saw its gains accelerate in North American trading hours, finishing the day sharply higher at $11,420/mt, its highest close in nearly two weeks. It gained 0.79% on the week, after shedding nearly 8% in the prior week. LME nickel remains between the five- and 10-day moving averages.

Lead: Three-month LME lead jumped to its highest in nearly two weeks at $1,734.5/mt in North American trading session, before it erased all those gains to close the day flat at $1,692/mt. It gained 3.5% on the week, after a 6.7% decline in the previous week.

Tin: Three-month LME tin resumed its rally, strengthening to end at $14,280/mt, its highest close in nearly two weeks. It rose 5.4% on the week, after collapsing 14.2% in the prior week, its biggest weekly loss in almost a decade. LME tin has stood above the 10-day moving average, while faces resistance at $14,500-14,600/mt.