SMM Evening Comments (Feb 10): Shanghai base metals closed mostly lower as coronavirus concerns lingered

SHANGHAI, Feb 10 (SMM) – Shanghai nonferrous metals mostly closed lower on Monday, amid ongoing concerns around the coronavirus outbreak in China.

Zinc shed more than 1% to lead the losses across base metals on the SHFE, lead and copper fell 0.7%, nickel declined 0.6%, and tin lost 0.5%. Aluminium bucked the trend to gain 0.1% on the day.

SHFE base metals kicked off the new week with a lower open, but received a boost following the release of upbeat Chinese inflation data. The National Bureau of Statistics reported this morning that China’s producer price index gained 0.1% year on year in January, compared to a 0.5% decline in December. Consumers prices last month rose 5.4% from a year ago, higher than a 4.9% increase expected by analysts in a Reuters poll and a 4.5% increase seen a month earlier.

Factories in China were set to return to work on Monday, but many are expected to remain shut for longer. Subdued resumption of production, coupled with fears of an escalation in the severity of the epidemic on the back of work resumption, weighed on base metals.

The ferrous complex, except for rebar and iron ore, traded higher on the day. Coke rose 0.6%, stainless steel and coking coal advanced about 0.3% and hot-rolled coil inched up 0.03%.

China’s futures markets have suspended night time trading since last week until further notice.

Copper: The most-traded SHFE 2003 contract recovered losses from a lower open to an intraday high of 45,590 yuan/mt, before it eased to finish the trading day 0.68% weaker at 45,410 yuan/mt, registering a two-day losing streak. Open interest for the contract expanded on the day as shorts loaded up positions. Whether it could remain above 45,300 yuan/mt will come under scrutiny tomorrow.

Aluminium: The most-active SHFE 2003 contract climbed back to positive territory, recovering from a lower open to close the day 0.11% higher at 13,715 yuan/mt. It has risen for four consecutive days, and weak demand is likely to limit upside in SHFE aluminium.

Zinc: Following a plunge in LME zinc on Friday, bearish investors flocked into SHFE zinc, taking the most-active SHFE 2004 contract to the 17,180 yuan/mt level. The contract hovered around that level in a range of 30 yuan/mt during the day, and closed 1.04% lower at 17,155 yuan/mt. SMM data showed that social inventories of zinc ingots in China continued to trend higher over the weekend. Restrictions imposed by authorities to contain the epidemic will deter demand for zinc from recovering in the near term, exerting downward pressure on zinc prices. Support is seen at 17,000 yuan/mt for SHFE zinc.   

Nickel: The most-active SHFE 2004 contract rallied to an intraday high of 105,220 yuan/mt, near the five-day moving average, before it weakened to end the day 0.61% lower at 104,450 yuan/mt. It is expected to continue to hover between the five- and 10-day moving averages tomorrow.

Lead: The most-traded SHFE 2003 contract touched a new three-year low below 13,900 yuan/mt before it recovered some ground to close the day 0.71% lower at 14,010 yuan/mt. Support lies at 14,000 yuan/mt, and there are signs of stabilisation in the recent downtrend. Lead inventories at Chinese smelters are high, as downstream consumers have delayed their resumption of production. The inventory pressure will pass on to social warehouses after logistics recover.

Tin: The most-liquid SHFE 2006 contract climbed during the day, clawing back losses from a lower open to close the day 0.46% weaker at 133,910 yuan/mt. Support is seen at 131,000 yuan/mt.