SMM Evening Comments (Feb 3): Fears of the escalated coronavirus outbreak lowered base metals on first trading day post CNY

SHANGHAI, Feb 3 (SMM) – SHFE nonferrous metals fell across the board as expected amid fears of an escalated conronavirus outbreak on Monday, as the market returns from the extended Chinese New Year holiday. 

Copper led the decline with a plunge of 6.48%. Aluminium lost 3.68%, lead dropped 5.17%, zinc dived 4.76%, tin declined 5.77%, and nickel fell 4.18%. 

The ferrous complex also finished lower as iron ore slumped 7.97%, rebar and hot-rolled coil lost 8.02%, stainless steel fell 5.48%, and coke ended down 5.89%. 

Night trading session on the SHFE will be halted from February 3 until further notice, according to the SHFE. 

Copper: The most-traded SHFE 2003 contract slumped to its daily limit in the early session of the first trading day after the CNY holiday, as the coronavirus epidemic raised fears of a slowdown in demand and spurred risk aversion sentiment in the market. The contract lost support from all moving averages and fell below 45,000 yuan/mt before it pared some losses and finished at 45,040 yuan/mt, down 6.48% on the day. As the sentiment is still dominated by concerns about demand in top consumer China on the back of uncertainties about a turning point in the virus development, near-term copper prices are expected to hover around 45,000 yuan/mt. 

Aluminium: The most-liquid SHFE 2003 contract found pressure from 13,800 yuan/mt and ended the trading day 3.68% lower at 13,605 yuan/mt. It once dipped to an a-year low of 13,510 yuan/mt. Virus concerns may keep the contract below 14,000 yuan/mt this week. Recovery of downstream consumption will be closely monitored. 

Nickel: The most-traded SHFE 2004 contract opened at a low level of 101,000 yuan/mt, and moved sideways around 101,800 yuan/mt before ended down 4.18% on the day at 102,190 yuan/mt. The K-indicator fell steeply below the Bollinger lower band and diverged from several moving averages. Support below from 100,000 yuan/mt should be monitored tomorrow. 

Lead: The most-liquid SHFE 2003 contract fell on Monday with limited upward momentum, on the back of weak fundamentals and five consecutive days of decline in LME lead. The contract ended down 5.17% on the day at 14,220 yuan/mt, with open interest falling 241 lots to 22,803 lots. The spot market will see thin trades this week as the disease outbreak deters shipments. This may limit any upward room in near-term lead prices. 

Tin: A weakened LME tin and loaded-up short positions weighed the most-traded SHFE 2006 contract to an intraday low of 130,280 yuan/mt. It trimmed some losses and closed below all moving averages at 130,790 yuan/mt, down 5.77% on the day. Support below is seen from 130,000 yuan/mt.