SMM Evening Comments (Apr 27): Shanghai base metals broadly higher on virus optimism, stockpiling hopes

SHANGHAI, Apr 27 (SMM) – Shanghai base metals got off to a strong start in the week before the five-day Labour Day break, after wrapping up a turbulent week sparked by wild swings in crude prices, on hopes for a new round of metals stockpiling in China.

The prospects of re-opening the global economy after the coronavirus outbreak and fresh economic stimulus measures also gave a lift to the market.    

SHFE base metals closed higher across the broad on Monday, with tin adding 3.5% to lead the way up. Zinc surged 2.1%, copper jumped 1.6%, lead and nickel advanced 1.3%, and aluminium rose 1.1%. The SHFE will keep its night trading session suspended until May 6.

Their counterparts on the LME were also broadly higher, with tin up more than 3% as of 18:28 Beijing time.

Southwest China’s Yunnan province on Friday launched the first salvo in metals stockpiling in a bid to prop up the sector, providing 1 billion yuan funds to encourage firms to stockpile up to 800,000 mt of nonferrous metals for one year. Northwest China’s Gansu province is also mulling a similar plan to stockpile 436,000 mt of nonferrous metals for at least seven months.

The Bank of Japan on Monday removed limits on its government bond purchases and increased corporate debt buying to help companies hit by the coronavirus crisis.

The market, meanwhile, is looking ahead to the US Federal Reserve meeting ending Wednesday and a European Central Bank (ECB) meeting Thursday as major central banks once again take the stage as the global economy battles against a deep depression.

Oil prices resumed their decline in Asian hours on Monday, with international benchmark Brent crude futures falling below $24 per barrel. The US dollar index, which tracks the greenback against a basket of its peers, meanwhile, slipped below the 100 mark.

On the data front, profits at China's industrial firms fell in March but at a slower pace than in the first two months. China's industrial profits declined 34.9% in March from a year earlier, compared with a 38.3% drop in the first two months, the National Bureau of Statistics said Monday.

Copper: The most-liquid SHFE June contract extended its gains from a higher open to a one-week peak of 42,880 yuan/mt, near the 60-day moving average, in morning trade. It later erased some gains to close the day 1.63% higher at 42,490 yuan/mt, its highest close since March 17.

Aluminium: The buildup of long positions and covering of short positions helped the most-traded SHFE June contract reverse an earlier slip. The contract hit a one-week high of 12,450 yuan/mt in final minutes of trading, and closed 1.06% higher at 12,410 yuan/mt. SMM data showed that social inventories of primary aluminium ingots continued to trend lower over the weekend, which also supported SHFE aluminium. The June contract is expected to move at 12,150-12,500 yuan/mt tomorrow.   

Zinc: Profit-taking forced the most-traded SHFE June contract to relinquish some gains after breaking through the 60-day moving average to a one-week high of 16,235 yuan/mt in morning trade, and the contract finished the day 2.06% firmer at 16,090 yuan/mt. Tightening ore supply and falling inventories in China are expected to remain supportive to zinc prices in the near term.

Nickel: The most-traded SHFE June contract surged to a nearly seven-week high of 103,780 yuan/mt in morning trade, before it eased to finish the day 1.25% higher at 101,520 yuan/mt.

Lead: The most-liquid SHFE June contract opened higher and notched its highest in six weeks at 14,030 yuan/mt before ending the day 1.34% higher at 13,940 yuan/mt. SHFE lead struggled to remain above the 14,000 mark, due to deteriorating fundamentals. In the physical market, spot trades weakened, missing the expectations of stockpiling ahead of the Labour Day holiday.

Tin: Tin was the best performer among SHFE nonferrous metals on Monday, as Yunnan, the first province to roll out the plan for metals stockpiling, is home to most of the country’s tin smelters.   

The exodus of shorts lifted the most-traded SHFE June contract to its highest in more than six weeks at 134,780 yuan/mt, before profit-taking by some longs sent the contract to settle at 132,710 yuan/mt, gaining 3.47% on the day. The contract has stood above the 60-day moving average, and now faces resistance at 134,000 yuan/mt.