SMM Morning Comments (Dec 18)

SHANGHAI, Dec 18 (SMM) –

Copper: LME copper fell to the day’s lows of $6,079/mt on Monday before it recovered from those losses and closed at $6,133.5/mt. The SHFE 1902 contract rebounded from a low of 48,860 yuan/mt and ended at 49,130 yuan/mt overnight. With pressure at moving averages, both LME and SHFE copper are expected to remain rangebound at lows today. LME copper is likely to trade at $6,100-6,150/mt with the SHFE 1902 contract at 48,700-49,200 yuan/mt. Spot prices are seen at discounts of 60 yuan/mt to premiums of 20 yuan/mt.

Aluminium: The SHFE 1902 contract jumped to close at a high of 13,760 yuan/mt overnight as investors flowed to the 1902 contract after the 1812 contract expired. With a smaller decline in social inventories and continued sluggish consumption, the SHFE 1902 contract is expected to trade at 13,600-13,720 yuan/mt today with spot discounts at 80-40 yuan/mt. LME aluminium rebounded from a low of $1,920/mt and closed at $1,936/mt on Monday. We see limited upside room for LME aluminium which is likely to trade at $1,925-1,945/mt today.

Zinc: While zinc traded higher to close at $2,550/mt on Monday, it remained under pressure from moving averages. Gains in the stocks across LME-registered warehouses also jeopardised the upward momentum in LME zinc. It is expected to trade at $2,520-2,570/mt today. The SHFE 1902 contract moved in a tight range and closed at 21,065 yuan/mt. Social inventories of refined zinc across Shanghai, Tianjin and Guangdong fell below 100,000 mt as of Monday December 17, and this provided support to SHFE zinc and helped it outperform its LME counterpart, which would generate inflows of seaborne materials. While SHFE zinc is stronger than its LME counterpart in the short term, a low season of consumption and uncertainties over macro economy are likely to prompt SHFE zinc to cautiously move at 20,800-21,200 yuan/mt today.

Nickel: LME nickel fell to close at $10,995/mt on Monday after it climbed past the $11,100/mt level. The SHFE 1905 contract pared some earlier gains to close at 90,620 yuan/mt overnight as longs took profits after the contract crept to highs of 91,290 yuan/mt. LME nickel is likely to hover around $11,000/mt today with the SHFE 1905 contract at 90,000-91,500 yuan/mt. Spot prices are seen at 90,000-97,000 yuan/mt.

Lead: LME lead plunged to close at $1,929/mt on Monday. After a lower open at 18,275 yuan/mt, the SHFE 1901 contract moved around 18,300 yuan/mt and ended at 18,285 yuan/mt overnight. With support at the 40-day moving average, the SHFE 1901 contract is expected to trade rangebound around that moving average. Support also sustains at 18,000 yuan/mt, a psychologically-significant level, if inventories stay low.

Tin: LME tin fell to close at $19,260/mt on Monday. Strength in the US dollar continues to weigh on LME tin. Support is seen at $19,000/mt while resistance is at $19,700/mt. The SHFE 1905 contract remained under pressure and moved between the five- and 20-day moving averages overnight, ending at 146,650 yuan/mt. It is expected to remain rangebound in the near term with resistance at 147,000 yuan/mt.