SMM Evening Comments (Apr 23): Shanghai base metals broadly higher as oil rebounded

SHANGHAI, Apr 23 (SMM) – SHFE base metals closed higher across the board on Thursday, as oil prices extended their overnight rebound that recouped some of losses from a record plunge.

Tin soared 4.7% on the day to be the best performer, copper surged 2.7%, lead jumped 2.3%, nickel advanced 1.6%, aluminium climbed 0.9% and zinc rose 0.5%. The SHFE will keep its night trading session suspended. 

The oil price rally, however, temporarily halted during European trading hours, as harrowing economic data rekindled concerns over the economic damaged caused by the coronavirus pandemic.

International benchmark Brent crude traded at $22.11 per barrel as of 17:46 Beijing time, after returning above $23 earlier in the session. On the LME, base metals also eased somewhat, and aluminium, zinc and lead dived into negative territory.

Three-month LME zinc was the worst performer and plummeted 1.6% to a three-week trough of $1,867.5/mt, as bourse data showed that zinc stocks across LME warehouses surged above 100,000 mt as of April 23. The contract has fallen for four consecutive trading days, on track for the first weekly decline in five weeks.

Eurozone business activity hit another record low in April, according to flash PMI (purchasing managers’ index) readings from IHS Markit. The April composite figure, which includes manufacturing and services, dropped to 13.5 from 29.7 in March.

Investors are also awaiting the latest unemployment report from the US Labor Department. Another 4.3 million workers are expected to have filed for benefits last week, which would bring the total number seeking benefits to over 26 million since states started shutting down in the second half of March in an effort to slow the virus.

Copper: The most-liquid SHFE June contract surged 2.74% on the day to end at 41,950 yuan/mt, clawing back most of the losses in the previous two days. It now faces a resistance confluence of the five-, 10- and 40-day moving averages.

Aluminium: The most-traded SHFE June contract opened higher and hit an intraday high of 12,375 yuan/mt, before it eased to close the day 0.91% higher at 12,245 yuan/mt. SMM data showed that social inventories of primary aluminium ingots in China have registered another weekly decline of more than 100,000 mt. That, together with firm backwardation on SHFE aluminium, points to strong demand recovery. The June contract is expected to move at 12,050-12,450 yuan/mt tomorrow.

Zinc: The most-traded SHFE June contract erased a good chunk of earlier gains to end the day 0.51% higher at 15,795 yuan/mt, as longs covered positions after the contract hit an intraday high of 15,915 yuan/mt in early morning trade. Two consecutive days of gains sent SHFE zinc back towards six-week highs, and tightening ore supply and falling social inventories are expected to prevent a sharp decline in SHFE zinc in the short term.

Nickel: The most-traded SHFE June contract fluctuated to finish the day 1.56% higher at 99,500 yuan/mt. With resistance at the 60-day moving average and support at the 10- and 40-day ones, the contract is expected to remain rangebound in the short term. Shorts, meanwhile, are rolling to the July contract.

Lead: The most-liquid SHFE June contract advanced 2.26% on the day to close at 13,825 yuan/mt, its highest close since March 16. The contract is unlikely to convincingly break through 13,850 yuan/mt in the near term as longs appear hesitant about entering the market

Tin: The aggressive load-up of long positions bolstered the most-traded SHFE June contract to a six-week peak of 130,140 yuan/mt, shortly before the contract closed at 129,050 yuan/mt, up 4.74% on the day. Resistance is seen at 130,000 yuan/mt.