SMM Evening Comments (May 22): Shanghai base metals fell across the board as China sets no 2020 GDP goal

SHANGHAI, May 22 (SMM) – SHFE nonferrous metals declined across the board on Friday, relinquishing gains from the prior four days, as concerns intensified over the long-term impact of the coronavirus outbreak after China dropped its annual growth target for the first time. 

Nickel led the declines with a drop of 4.47%. Copper shed 2.13%, aluminium fell 0.43%, lead lost 0.81%, zinc declined 1.35%, and tin dropped 2.44%. 

The ferrous complex also mostly traded lower. Rebar went down 1.13%, hot-rolled coil dipped 1.24%, stainless steel slipped 2.2%, and coke eased 1.74%. Iron ore, meanwhile, ended 0.77% higher. 

China has decided not to set a target for its economic growth for 2020 due to great uncertainties about the impact from COVID-19, and aims to keep the fundamentals of the economy stable, according to the government work report delivered Friday.

Monetary and fiscal policies came largely in line with market expectations. Notably, the budget deficit target for this year was raised to "at least" 3.6% of gross domestic product (GDP).

The country also pledged more supportive measures such as tax and fee cuts, to create a more enabling environment and help market entities overcome difficulties and achieve development.

Copper: The most-traded SHFE July contract declined on departing longs, hitting a session low of 43,240 yuan/mt and finished the day 2.13% lower at 43,260 yuan/mt. The renewed tensions between US and China also added to risk aversion sentiment and weighed on the red metal. With little development around fundamentals, the contract may follow its LME counterpart and test support from 43,000 yuan/mt tonight. 

Aluminium: The most-liquid SHFE July contract ended the day 0.43% lower at 12,790 yuan/mt, following an intraday low of 12,730 yuan/mt. It has fallen below the five-day moving average with the daily MACD red line shortening. Tonight, pressure above from 13,000 yuan/mt will be monitored. 

Zinc: The most-active SHFE July contract traded in a narrow range today, stabilising around 16370 yuan/mt and ending the day 1.35% lower at 16,395 yuan/mt. Longs covered their positions, leading to a decline of 8,873 lots in open interest.

Nickel: The most-traded SHFE July contract gave up gains from earlier this week as cautious investors aggressively cut their bullish positions. The contract closed down 4.47% on the day at 99760 yuan/mt, with open interest down 37198 lots from Thursday to 79672 lots. 

Lead: The most-active SHE July contract slipped to an intraday low of 13970 yuan/mt before it closed down 0.81% on the day at 14,045 yuan/mt. A weakened LME lead may depress the SHFE contract tonight, which is expected to test support from the five-day moving average. 

Tin: Exiting longs dragged on the most-liquid SHFE July contract, which fell to a session low of 131,620 yuan/mt and ended 2.44% lower on the day at 131,710 yuan/mt. Support remained from the 10-day moving average. The contract will likely test 130,000 yuan/mt tonight.