SMM Evening Comments (Feb 4): Base metals recovered as supportive measures calm virus fears

SHANGHAI, Feb 4 (SMM) – SHFE nonferrous metals mostly recovered on Tuesday February 4 as supportive measures from China’s central bank lifted market sentiment, after the market shivered on fears of an escalated coronavirus outbreak. 

Nickel led the rebound with a rise of 2.57%. Copper advanced 0.56%, lead added 0.46%, tin grew 0.16%, while aluminium fell 0.37%, and zinc eased 0.03%. 

The ferrous complex also moved higher as rebar gained 1.63%, hot-rolled coil increased 1.41%, stainless steel climbed 1.46%, coke rose 0.94%, while iron ore lost 2.56%. 

China's central bank would inject 500 billion yuan through open market operations on Tuesday, traders said, after an injection of 1.2 trillion yuan a day earlier.

The People's Bank of China (PBOC) will pump 380 billion yuan via 7-day reverse repos into the banking system, and another 120 billion yuan via 14-day tenor.

Copper: The most-traded SHFE 2003 contract stemmed its decline from the previous session as supportive measures from China’s central bank calmed some investors’ concerns about the impact of the virus outbreak. The contract climbed to an intraday high of 45,290 yuan/mt and finished the day 0.49% higher at 45,260 yuan/mt. Loaded-up longs elevated the open interest by 751 lots, to 108,000 lots. Recovered confidence in copper consumption in top consumer China amid positive prospects for virus development may help to support near-term copper prices. The contract is expected to test pressure from 45,300 yuan/mt on Wednesday. 

Aluminium: The most-liquid SHFE 2003 contract moved sideways but failed to regain losses from Monday as departing longs weighed prices to a session low of 13,540 yuan/mt in early trades. With pressure from the 60-day moving average, the contract lost 0.37% on the day and closed at 13,605 yuan/mt. The K-indicators remained below all moving averages and the MACD green line lengthened. The contract may unlikely to recover significantly before the resumption of downstream demand. 

Zinc: The most-liquid SHFE 2003 contract slipped to a-year low after opened at 16,915 yuan/mt, and closed the session slightly lower at 17,340 yuan/mt. Negative fundamentals and delayed recovery of downstream demand will keep zinc prices under pressure. 

Nickel: The most-traded SHFE 2004 contract regained part of the losses from Monday as longs loaded up their positions on upbeat macroeconomic sentiment, lifting the contract by 2.57% on the day to close at 104,420 yuan/mt. Pressure above from 105,000 yuan/mt will be monitored on Wednesday. 

Lead: The most-active SHFE 2003 contract rose as some short positions booked profits and exited. It gained 0.46% on the day and finished at 14,320 yuan/mt, with open interest down 956 lots to 21,847 lots. The upside room in prices, however, will be capped given muted trades in the spot market. 

Tin: The most-active SHFE 2006 contract trimmed some gains after rising longs sent it to an intraday high of 132,760 yuan/mt. It closed 0.16% higher on the day at 131,750 yuan/mt, still below all moving averages. Support below is seen from 130,000 yuan/mt, with resistance above between 133,000-134,000 yuan/mt.