SMM Evening Comments (May 14): Shanghai base metals mostly fell on concerns about coronavirus crisis

SHANGHAI, May 14 (SMM) – SHFE nonferrous metals, except for aluminium and nickel, closed lower on Thursday, following after they opened mostly lower today, as concerns of the economic fallout from the coronavirus pandemic continued to grip investors.

US Federal Reserve Chairman Jerome Powell on Wednesday warned of “significant downside risks” from the coronavirus pandemic and suggested that the path ahead is “highly uncertain.”

Zinc fell the most with a drop of 1.2%. Copper shed 0.16%, lead slipped 0.93%, tin fell 0.41%, while aluminium added 1.05% and nickel climbed 0.2%. 

The ferrous complex traded in a mixed note as iron ore increased 1.09%, hot-rolled coil gained 0.33%, coke advanced 2.6%, while rebar eased 0.52%, and stainless steel went down 0.11%. 

East China’s Jiangxi province has introduced 16 measures to support the copper industry, including offering tax incentives, preferential electricity prices, and steps to expand copper consumption. The move offset part of the bearish sentiment as investors assessed the macroeconomic development.

Copper: The most-traded SHFE June contract managed to hold stable around 43,010 yuan/mt after loaded-up shorts weighed it to a session low of 42,800 yuan/mt. Departing long positions near closing sent the contract 0.16% lower on the day at 42,910 yuan/mt. The price spread between the SHFE May and June contracts narrowed to around 150 yuan/mt. With continued support from the 20- and 60- day moving averages, the June contract is expected to test support from 43,000 yuan/mt tonight. 

Copper stocks in warehouses tracked by the London Metal Exchange jumped by the most in nearly three months on Thursday, as consumption beyond China has been hit hard by the COVID-19 lockdown restrictions.

Aluminium: The most-liquid SHFE July contract showed signs of breaking up the 60-day moving average above as it moved to a session high of 12,575 yuan/mt before ending up 1.05% higher on the day at 12,530 yuan/mt. SMM data showed that domestic social inventories of primary aluminium and aluminium billet continued to fall sharply this week, pointing to stable consumption. The price difference between the May and June contracts will be monitored as the May contract will finish its last trading day Friday. 

Zinc: The most-active SHFE July contract fell for the fourth consecutive day on the back of rising shorts, further giving up gains from the previous week. It slipped to a session low of 16,325 yuan/mt and closed 1.2% lower on the day at 16,430 yuan/mt. Ample domestic inventories may see the contract pulling back further tonight and support from the 40-day moving average will be watched. 

Nickel: The most-traded SHFE July contract again posted a V-shaped rebound, as it bounced back after dipped to an intraday low of 100,210 yuan/mt, ending the day 0.2% higher at 101,170 yuan/mt. The contract is expected to continue to trade rangebound between the five- and 10- day moving averages tonight. 

Lead: The most-active SHFE June contract slowed its downward trend and hovered weakly around the daily moving average, closing the day 0.93% lower on the day at 13,860 yuan/mt. Firm prices of battery scrap could offer some support to near-term lead prices. 

Tin: The most-liquid SHFE July contract traded lower on Thursday, ending at 129,600 yuan/mt, 0.41% lower on the day, following an intraday low of 129,150 yuan/mt. Support from the 20-day moving average, or 127,500 yuan/mt will be monitored tonight.