SMM Morning Comments (Jun 12): Shanghai base metals fell across the board as coronavirus concerns return

SHANGHAI, Jun 12 (SMM) – SHFE nonferrous metals traded lower across the board on Friday morning, extending losses from overnight, as risk aversion grew on diminished expectations that the global economy would recover swiftly from the coronavirus pandemic.

Worries intensified about a second wave of the coronavirus in America and this also depressed investors sentiment. 

LME and SHFE base metals closed lower across the board overnight, with LME nickel leading the losses with a drop of 2.77%. LME copper lost 2.56%, aluminium slipped 2.03%, zinc fell 1.8%, lead dipped 0.34% and tin dropped 1.63%. 

SHFE copper shed 1.65%, aluminium declined 0.8%, zinc went down 1.42%, nickel dropped 1.9%, lead eased 1.54% and tin ended down 1.12%.

US stocks also plunged, by the most since mid-March on Thursday amid a gloomy economic outlook from the Federal Reserve.

Crude-oil futures dropped Thursday, with the US and global benchmark prices posting their biggest one-day loss in over six weeks.

Copper: Three-month LME copper trended downward on Thursday following a plunge in the stock market, as investors added shorts on bearish prospects for economic recovery. It closed the day 2.56% lower at $5,753/mt, with the most-active SHFE contract also ending lower at 46,440 yuan/mt overnight. With pressure from bearish positions, the contract may trade between 46,100-46,600 yuan/mt today with LME copper hovering at $5,690-5,760/mt. Increased operations of copper materials producers pointed to strong demand from the power, infrastructure and home appliance sectors, and this will underpin domestic copper prices. Spot discounts are forecasted at 40-20 yuan/mt today.  

Aluminium: Three-month LME aluminium declined after climbed, finishing the day 2.03% lower at $1,594/mt. The most-traded SHFE July contract relinquished gains from the previous day as longs covered their positions. It ended at 13,565 yuan/mt last night and may trade between 13,450-13,900 yuan/mt today.  

Zinc: Three-month LME zinc broke down $2,000/mt and hit a session low of $1,990/mt amid loaded-up shorts, ending down 1.8% on the day at $1,992.5/mt. LME zinc inventories expanded for the third consecutive day on Thursday, rising 6.08% or 6,875 mt to stand at 119,900 mt. 
The most-liquid SHFE July contract also trended downward with its LME counterpart as it came off from a session high of 16,460 yuan/mt and finished 235 yuan/mt lower on the day at 16,325 yuan/mt. A broad decline in base metals and weakness in spot trades weighed on zinc prices. Whether domestic monetary stimulus policy would support consumption and lift zinc prices will be monitored in the near term. Today, the contract is expected to trade between 16,100-16,600 yuan/mt with LME zinc at $1,970-2,020/mt. 

Nickel: Three-month LME nickel lost support from the 10-day moving average and moved lower to test the $12,600/mt level, ending down 2.77% or $360/mt on the day at $12,650/mt. Support from the Bollinger lower band, or $12,500/mt should be watched today. 
The most-active SHFE August contract consolidated around 101,500 yuan/mt amid little development on fundamentals. It closed the day 560 yuan/mt lower at 101,270 yuan/mt. Support below is seen from 101,000 yuan/mt today. 

Lead: Three-month LME lead pared some losses after it slipped to a session low of $1,712/mt, and finished the day 0.34% lower at $1,737/mt. The most-traded SHFE contract broke its recent rangebound trend as it showed no signs of bouncing back overnight, falling to a low of 14075 yuan/mt and ending down 1.54% on the day at 14,090 yuan/mt. It is expected to test support from 14,000 yuan/mt today. 

Tin: Three-month LME tin dipped swiftly to a session low of $16,660/mt, following a build of 625 mt in LME tin inventories. It closed the day $280/mt lower at $16,940/mt, remaining above all moving averages. Support below is expected from the 10-day moving average or $16,300/mt today. 
The most-liquid SHFE August contract declined after departing shorts sent it to a session high of 137,440 yuan/mt. Finishing 810 yuan/mt lower overnight at 136,410 yuan/mt, the contract will likely test support from the 20-day moving average, or 134,200 yuan/mt today.