SMM Morning Comments (Apr 8): Base metals pulled back after Tuesday’s substantial rally

Published: Apr 08, 2020 09:41 (GMT+8)
Shanghai and London base metals cruised lower across the board in early morning trade on Wednesday, reversing gains from Tuesday’s substantial rally, as caution returned to the market with concerns over the coronavirus pandemic lingering. Overnight on the LME, base metals closed broadly higher. Tin remained the biggest gainer with a nearly 2.7% increase, lead jumped 2.6%, copper surged 2.4%, nickel and zinc both rose more than 1.3%, while aluminium inched up 0.2%.

SHANGHAI, Apr 8 (SMM) – Shanghai and London base metals cruised lower across the board in early morning trade on Wednesday, reversing gains from Tuesday’s substantial rally, as caution returned to the market with concerns over the coronavirus pandemic lingering.

 

Overnight on the LME, base metals closed broadly higher. Tin remained the biggest gainer with a nearly 2.7% increase, lead jumped 2.6%, copper surged 2.4%, nickel and zinc both rose more than 1.3%, while aluminium inched up 0.2%.

That came in line with broad gains across SHFE base metals on Tuesday. The SHFE kept its night trading session suspended.

 

Beijing’s latest economic stimulus efforts and hopes that the spread of the global coronavirus pandemic may be slowing improved investor sentiment on Tuesday and contributed to gains in base metals.

 

LME base metals eased later in the session, as US stocks pared their earlier gains and as oil prices dropped on a jump in US crude inventory.

 

Copper: Three-month LME copper notched its highest in nearly three weeks at $5,114/mt in final minutes of the European trading session. It later gave back some gains to end the day 2.44% higher at $5,024/mt, as oil prices dropped and as concerns about demand lingered. LME copper is expected to oscillate around $5,000/mt, with a range of $4,970-5,030/mt today, and SHFE copper is expected to move at 40,200-40,700 yuan/mt. Spot premiums are seen 130-160 yuan/mt.

 

Aluminium: Three-month LME aluminium climbed to an intraday high of $1,500/mt in late European trading hours, before it pared most of the gains to end the day 0.2% higher at $1,478/mt.

 

Zinc: Three-month LME zinc hit a three-week high of $1,953/mt in the European trading session, before it pared some gains to close the day 1.32% higher at $1,923/mt. LME zinc now sits around the middle Bollinger band and is supported by the five- and 10-day moving averages. It is expected to move at $1,880-1,930/mt today, with the SHFE 2006 contract at 15,200-15,700 yuan/mt. Spot premiums for domestic 0# Shuangyan are seen stable at 40-70 yuan/mt over the SHFE April contract.

Raw material supply shortages at Chinese zinc smelters have eased following recent gains in zinc prices and a cut to concentrate treatment charges, while demand for zinc ingots is recovering as downstream processors in China are moving up a gear. The shock from the pandemic to foreign demand, however, is expected to limit upside in zinc prices.

 

Nickel: Three-month LME nickel jumped above $11,500/mt in early North American trading hours, before resistance at the 20-day moving average forced it to ease to close the day 1.33% higher at $11,430/mt. LME nickel has stood above the five- and 10-day moving averages, but comes under pressure from the 20-day moving average.  

 

Lead: Three-month LME lead rose to a one-week high of $1,740/mt in North American trading hours, before it relinquished some gains to close the day 2.62% higher at $1,724/mt. Two consecutive days of gains failed to help LME lead move out of the range between $1,650-1,750/mt. Pressure at $1,750/mt will come under scrutiny.

 

Tin: Three-month LME tin hit its highest since March 17 at $14,895/mt in early European trading hours, and it later erased some gains to finish the day 2.65% higher at $14,730/mt, standing above the 20-day moving average. Resistance is seen at $15,000/mt.

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

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