SMM Morning Comments (Apr 2): Base metals fell broadly on deepening pandemic crisis

SHANGHAI, Apr 2 (SMM) – Shanghai and London base metals cruised lower across the board in early morning trade on Thursday, as investors continue to monitor the human and economic toll of the coronavirus pandemic.

Data released on Thursday provided some clues on the extent of economic damage caused by the pandemic. US manufacturing activity contracted in March, and disruptions caused by the coronavirus pandemic pushed new orders received by factories to an 11-year low.

The eurozone’s manufacturing sector also contracted last month, with factory output suffering its worst month since the bloc’s economic crisis of 2012.

China’s manufacturing activity expanded slightly in March as factories began to return online with daily infection numbers slowing, but the survey noted demand challenges ahead.

Overnight, US stocks posted steep losses to kick off the second quarter, while the US dollar advanced against a basket of major currencies. Oil prices fell on oversupply fears and a jump in US inventory.

Overnight on the LME, base metals closed lower across the board, reversing gains from the previous session. Lead slumped 2.7% on the day to lead the losses, copper and zinc tumbled more than 2.5%, nickel dropped 1.8%, and tin fell 0.8%. Aluminium extended its decline to a four-year trough and shed 2% on the day.

The SHFE kept its night trading session suspended.

Copper: Three-month LME copper slipped to finish Wednesday trading at $4,804.5/mt, erasing much of gains from the previous session.

Aluminium: Three-month LME aluminium extended its decline and touched a four-year trough of $1,483.5/mt in early North American trading hours, before it recovered some ground to close at $1,495/mt. It is expected to remain weak and hover at $1,480-1,530/mt today, with the most active SHFE 2005 contract at 10,070-11,700 yuan/mt. Spot discounts are seen at 70-50 yuan/mt.

Zinc: Three-month LME zinc reversed an earlier rebound in the late North American trading session and closed at $1,858.5/mt, above the 10-day moving average. LME zinc is expected to move at $1,840-1,890/mt today, with the most-traded SHFE May contract at 14,700-15,200 yuan/mt. Spot premiums for domestic 0# Shuangyan are seen slightly lower at 50-80 yuan/mt over the SHFE April contract, supported by anticipation of tax cuts.

Nickel: Three-month LME nickel fell below the five- and 10-day moving averages to end at $11,260/mt. Whether it could return above the two moving averages will come under scrutiny.

Lead: Three-month LME lead slumped to end at $1,699.5/mt, giving back gains from Tuesday and snapping a one-week rally. Whether it could remain above the 10-day moving average will come under scrutiny.

Tin: Three-month LME tin closed lower at $14,420/mt, after a volatile trading session. LME tin was supported by the five-day moving average. Support is seen at the 10-day moving average and $14,000/mt.