SMM Evening Comments (Apr 16): Shanghai base metals mixed as virus concerns weigh on sentiment

SHANGHAI, Apr 16 (SMM) – SHFE nonferrous metals closed mixed on Thursday, as concerns over the scale of the economic fallout of the coronavirus pandemic continued to weigh on sentiment.

Nickel sank 1.9% to be the worst performer, tin shed 0.5% and copper edged down less than 0.1%. Lead inched up 0.04%, zinc gained 0.6%, while aluminium extended its rally and advanced 1.5% on the day. The SHFE will keep its night trading session suspended.

On the LME, base metals were mixed as the US dollar index extended its rally while oil prices temporarily stemmed their decline. Copper, aluminium and zinc were in the green as of 18:34 Beijing time, while nickel, tin and lead were in the red.

Investors remained cautious ahead of tonight’s release of weekly US jobless data, which are likely to provide more evidence of a deep recession in the world’s biggest economy. Economists forecast US weekly jobless claims of 5.1 million, lifting total filings during the crisis above 20 million.

Data published overnight showed that US retail sales suffered a record drop in March while industrial production recorded the steepest decline since early 1946.

Copper: The most-liquid SHFE June recovered after a lower open to finish the day just 0.07% lower at 41,560 yuan/mt, holding onto one-month highs. Lingering worries about ore supply lent support to copper prices.

Aluminium: The most-traded SHFE June contract extended its rally, notching a fresh nearly one-month high of 12,125 yuan/mt before closing the day 1.47% higher at 12,085 yuan/mt. Today’s gain, following a more than 1.5% jump on Wednesday, was primarily bolstered by short-covering as demand in China is recovering as expected and liquidity crunch has eased. The contract is expected to hover between 12,000-12,150 yuan/mt tomorrow.

Zinc: Resumed buying by longs lifted the most-traded SHFE June contract back to the green in morning trade, which rose above the 16,000 yuan/mt. The contract hovered in a 50 yuan/mt range around 15,950 yuan/mt in afternoon trade, and finished the day 0.6% higher at 15,970 yuan/mt. Growing concerns about supply are expected to continue to buoy zinc futures in the short term, and whether SHFE zinc could stand convincingly above 16,000 yuan/mt will come under scrutiny.

Nickel: The most-traded SHFE June contract extended its losses from a lower open, and finished the day 1.92% lower at 95,760 yuan/mt. SHFE nickel has fallen below the five-day moving average, but remains above the 10-day moving average and the middle Bollinger band at 95,300 yuan/mt.

Lead: The most-liquid SHFE June contract clawed back losses from a weak start, as high spot premiums and low social inventories encouraged longs to enter the market at lows. It closed the day a tad higher at 13,680 yuan/mt, holding onto the 13,700 yuan/mt level. SHFE lead is unlikely to move out of its recent range on expectations that inventories in China are unlikely to continue to fall substantially as secondary lead smelters recover output.

Tin: The most-traded SHFE June contract rallied in the final hour of trading, recouping some of earlier losses to close the day 0.5% weaker at 126,180 yuan/mt. SHFE tin now sits below the five- and 10-day moving averages. Resistance is seen at a previous high of 129,000 yuan/mt, while support is at the 10-day moving average at 123,900 yuan/mt.