SMM Morning Comments (Oct 25)

SHANGHAI, Oct 25 (SMM) –

Copper: Downbeat economic data across Europe and upbeat data for the US shored up the US dollar index overnight and weighed on LME copper. LME copper fell past $6,200/mt to a low of $6,171/mt overnight. The SHFE 1812 contract ended in the red overnight even as it rebounded from a low of 49,980 yuan/mt. In addition to the robust US dollar, weakness across equity markets which dented investor risk appetite also pressured copper prices. LME inventories have gained for two consecutive days while downstream consumption has yet to pick up. Long-term contracts would be delivered today, which is likely to activate the physical market today. LME copper is expected to trade at $6,120-6,180/mt today with the SHFE 1812 contract at 49,900-50,180 yuan/mt. Spot discounts are seen up to 50 yuan/mt.

Aluminium: After falling to session lows of 14,190 yuan/mt, the SHFE 1812 contract rebounded and clawed back most earlier losses overnight. Recent output cuts at some domestic primary aluminium and alumina producers failed to support aluminium prices. The contract is expected to trade at 14,160-14,300 yuan/mt today with spot discounts at 70-30 yuan/mt. As the dollar strengthened, LME aluminium on Wednesday failed to pare losses it made during Asian trading sessions and tumbled to $1,996/mt, the lowest in close to six months. It rebounded slightly by closing and settled at $2,004/mt. It has closed lower for six consecutive trading days with a shorter daily MACD green line. It is likely to trade at $1,990-2,020/mt today.

Zinc: LME zinc lost all the gains overnight as a stronger US dollar dragged it from a high of $2,721/mt. Macroeconomic pessimism is likely to keep it trading at $2,640-2,680/mt today. The SHFE 1812 contract fell 170 yuan/mt and settled at 22,370 yuan/mt overnight. It saw open interest fell 8,338 lots as transactions slowed. With caution among investors, the contract is expected to trade at 22,000-22,500 yuan/mt today.

Nickel: LME nickel fell and closed near day-lows on Wednesday. As shorts added their positions, the SHFE 1901 contract slid before it hovered around 101,800 yuan/mt within a narrow range to finish overnight trading hours. Shandong Xinhai’s earlier commissioning of new capacity cast a shadow over the market. LME nickel is expected to hover around $12,250/mt today with the SHFE 1901 contract at 101,000-103,000 yuan/mt. Spot prices are seen at 102,000-109,000 yuan/mt.

Lead: LME rebounded to end in positive territory overnight after it dropped to $1,994/mt as the US dollar strengthened and US stocks were routed. Trading enthusiasm among investors cooled while shorts and longs diverged at the $2,000/mt level. The SHFE 1812 contract traded rangebound in positive territory overnight and investors were keen to purchase at 18,000 yuan/mt, a psychologically-significant level. The contract is likely to weaken today as the domestic stocks markets might track the steep losses in US stocks overnight.

Tin: On Wednesday, LME tin rose from Tuesday. We expect it to strengthen in the short term with resistance at $19,400/mt. The SHFE 1901 contract traded rangebound overnight and is likely continue such pattern into near term with resistance at 149,000 yuan/mt and support at 146,000 yuan/mt.