SMM Morning Comments (Apr 22): Shanghai base metals fell on Wednesday morning, nickel lost 4%

SHANGHAI, Apr 22 (SMM) – SHFE nonferrous metals opened lower across the board on Wednesday morning, extending losses from the previous day, as the oil market collapse weighed on investors sentiment for a second straight day.

The most-active SHFE June nickel contract declined as much as more than 4% on Wednesday morning.

The May US oil contract, which settled in negative territory Monday, recovered before expiring, but both the June contract and the global benchmark Brent traded lower on Tuesday.

LME base metals fell across the board overnight as sharp losses in oil prices dampened market confidence. Nickel led the declines with a drop of 2.86%. Tin shed 2.56%, copper fell 2.85%, aluminium lost 1%, zinc slipped 1.85%, and lead went down 1.25%.

Copper: Three-month LME copper performed weakly on Tuesday as it failed to hold above the daily moving average even as it trimmed some losses after slipped to a session low of $4,953/mt. It closed the day 2.85% lower at $5,026.5/mt. Near-term prices will take a hit from the oil market collapse, which sparked concerns about demand and cash crunch. Today, LME copper is seen trading at $4,980-5,040/mt with the most-active SHFE contract at 40,500-41,000 yuan/mt. Spot premiums are seen at 140-170 yuan/mt as sellers firm up prices on reduced futures. 

Zinc: Three-month LME zinc declined on loaded-up shorts, falling to a session low of $1,883.5/mt and finished Tuesday 1.85% lower at $1,909/mt. Support remained from the Bollinger middle band with pressure from the 40-day moving average. LME zinc inventories continued to dip 0.2%, or 200 mt on Tuesday to 97,850 mt. The continued rout in crude prices and an absence of demand recovery overseas will likely keep LME zinc weak at $1,880-1,930/mt today, with the most-active SHFE contract trading between $15,500-16,000/mt. 

Nickel: Three-month LME nickel failed to hold above the 60-day moving average, closing down $335/mt on the day at $12,160/mt. Support from the five-day moving average will be monitored today. 

Tin: Three-month LME tin relinquished gains from the prior session and declined to test support from the Bollinger middle band, ending down $390/mt on the day at $14,840/mt. Support below is likely at the 20-day moving average or $14,500/mt today.