SMM Morning Comments (Apr 28): Shanghai base metals mostly dipped after Monday's rally

SHANGHAI, Apr 28 (SMM) – SHFE nonferrous metals traded mostly lower on Tuesday morning, following a broad rally on Monday, as investors weighed the Chinese governments decision to support metal stockpiling and foreign countries reopening plans. 

Copper shed close to 1% in early morning trades, with tin and nickel losing more than 1%. Aluminium, meanwhile, traded marginally higher, after a 1.1% rise Monday. 

US oil futures resumed declines Monday, dipping almost 25% as reignited concerns about storage capacity shortage amid overflow of crude sent the June contract to its second-lowest settlement on record.

LME base metals ended mixed Monday, with tin advancing 3.35% to become the best performer. Zinc climbed 1.27%, lead added 0.77%, while copper shed 0.04%, aluminium fell 0.5% and nickel slipped 0.12%.

With a slowdown in the spread of the coronavirus, plans to partially reopen the economy announced by a number of countries and US states boosted investor sentiment, with certain businesses poised to benefit from the first wave of consumers emerging from the coronavirus driven quarantine.

Copper: Three-month LME copper failed to hold onto gains from last Friday, decreasing 0.04% overnight due to again plunged oil prices. Supply concerns on the raw materials front remain as coronavirus crisis in South America showed no signs of easing. Today, LME copper is likely to trade between $5,180-5,230/mt with the most-liquid SHFE contract at 42,000-42,500 yuan/mt. Spot copper premiums are seen at 140-150 yuan/mt with consumers taking a wait-and-watch stance. 

Zinc: Three-month LME zinc rose to a session high of $1,927/mt and finished the day 1.27% higher at $1,910/mt, as widespread stimulus measures and plans to easing lockdowns boosted market sentiment. LME zinc inventories continued to shrink, by 1700 mt, or 1.71%, to 97,775 mt. The resumption of mining operations and zinc-related consumption will determine near-term prices of the metal. LME zinc is expected to hover between $1,880-1,930/mt with the most-liquid SHFE contract at 15,800-16,300 yuan/mt. 

Nickel: The decision to support commercial stockpiling of metals by Chinese governments lifted market sentiment overnight, but macroeconomic development and fundamentals should be more focused on. Three-month LME nickel followed the movement of its SHFE last night, slipping to an intraday low of $12,170/mt and pared some losses to end at $12,235/mt, down 0.12% on the day. Support from the 60-day moving average will be monitored. 

Lead: Three-month LME lead trimmed some increase as it came off after climbing to a session high of $1,656/mt, bolstered by news that China will encourage stockpiling of key nonferrous metals by firms to prop up the market. LME lead closed 0.77% higher on the day at $1,636.5/mt, with limited upward momentum expected in the near term. 

Tin: Three-month LME tin jumped to as high as $15,500/mt during the Asian trading hours, closing the Monday session $500/mt higher at $15,410/mt. LME tin inventories lost 80 mt on Monday to 5,965 mt. Today, LME tin is expected to face resistance from $15,600/mt, with support expected from $15,000/mt.