SMM Evening Comments (Apr 9): Shanghai base metals closed mostly higher amid optimism OPEC+ meeting will result in output cut

SHANGHAI, Apr 9 (SMM) – SHFE nonferrous metals closed mostly higher on Thursday, as investors were eyeing an OPEC+ meeting at which a massive oil production cut is expected to be agreed.

Tin jumped 1.5% on the day to lead the gains, nickel rose 0.9%, aluminium advanced 0.7% and copper gained 0.4%, while lead fell 0.5% and zinc declined 0.8%. The SHFE will keep its night trading session suspended.

Nonferrous metals on the LME, except for tin, eased after the European trading session was kicked off. Tin jumped more than 3% as of 18:00 Beijing time.

The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia — a group known as OPEC+ — are set to convene a video conference meeting on Thursday.

Hopes of an agreement to cut between 10 million and 15 million barrels per day (bpd) rose after media reports suggested Russia was ready to reduce its output by 1.6 million bpd and Algeria’s energy minister said he expected a “fruitful” meeting.

Optimism around supply cut contributed to a surge in oil prices overnight, and oil prices extended their gains on Thursday.

Upside potential in metals prices, however, continued to be limited by worries about the economic fallout from the coronavirus pandemic and demand destruction caused by the anti-virus measures.

The latest US unemployment claims report, for the week ended April 4, is set to release at 8:30 am ET Thursday. Economists are expecting an increase of 5 million, which would build on the record-shattering prior two readings of 6.6 million and 3.3 million.

Copper: SHFE copper held onto three-week highs, but failed to stand above 41,000 yuan/mt for several times, indicating limited upward momentum in prices. The most-traded SHFE May contract hit a new more than three-week high of 41,180 yuan/mt following a higher open. It later eased to finish the day 0.44% higher at 40,800 yuan/mt, further away from the 20-day moving average.

Aluminium: The most-liquid SHFE June contract traded rangebound after a higher open, and finished the day 0.65% higher at 11,655 yuan/mt.

Zinc: SHFE zinc weakened for a second straight day, as shorts continued to dominate the market. Cross currents—weak consumption and ore supply shortages—are expected to keep zinc prices in swinging trade. The most-active SHFE June contract reversed an earlier rally in afternoon trade to an intraday low of 15,540 yuan/mt before it ended the day 0.8% lower at 15,555 yuan/mt.

Nickel: SHFE nickel clang to three-week highs. The most-traded SHFE June contract opened higher and later eased to close the day 0.89% higher at 94,970 yuan/mt, remaining above the 20-day moving average. Whether SHFE nickel could stand convincingly above the 20-day moving average will remain under scrutiny.

Lead: SHFE lead fell for a second straight day, on expectations of a jump in secondary lead production in April. In the physical market, premiums of secondary lead over primary lead are about to flip into discounts, but continued tightness in scrap supply will slow the decline in lead prices. The most-active SHFE May contract reversed gains from a higher open to an intraday low of 13,655 yuan/mt, before it recovered some ground to end the day 0.47% lower at 13,700 yuan/mt. Support at 13,600 yuan/mt will remain under scrutiny in the near term.

Tin: SHFE tin continued its rally. The most-liquid SHFE June contract gained 1.51% on the day to end at 122,700 yuan/mt.