Evening Comments (Dec 19): Aluminium extended gains as stocks fell to 3-year lows

SHANGHAI, Dec 19 (SMM) – Shanghai aluminium prices continued its rally on Thursday, as data showed that stocks in China fell to lows in about three years.

SMM data showed that social inventories of primary aluminium ingots in China fell 44,000 mt in the week ended December 19 to 604,000 mt, and those of aluminium billets declined 2,100 to 52,300 mt.

SHFE aluminium rose 1% on the day, among the broad gains across nonferrous and ferrous complexes on signs of progress in resolving the spat between the US and China and latest stimulus from China’s central bank.

Lead advanced 1.3%, nickel climbed 0.7%, tin gained 0.5%, zinc increased 0.4%, while copper edged down 0.02%. Iron ore added 1.9% to lead gains across the ferrous complex, coke rose 1.6%, coking coal climbed 1.2%, rebar crept up 1%, stainless steel increased 0.8%, and hot-rolled coil inched up 0.06%.

China’s finance ministry on Thursday unveiled a new list of tariff exemptions for imports from the US, effective from December 26. The commerce ministry said on the same day that China and the US are in touch over the signing of their Phase 1 trade deal.

China’s central bank on Thursday maintained the interest rate on 14-day reverse repurchase agreements unchanged, after a cut on Wednesday.

Copper: The most active SHFE 2002 contract recouped earlier losses to close the day just a tad weaker at 49,110 yuan/mt.

Aluminium: The most traded SHFE 2002 contract recovered from earlier losses and held onto overnight gains to finish the trading day 1% higher at 14,200 yuan/mt, highs in three months. The decline in inventories are expected to continue into the end of the year. This, coupled with firm spot premiums, will remain supportive of nearby contracts. The SHFE 2002 contract is expected to move between 14,100-14,200 yuan/mt tonight.  

Zinc: The most active SHFE 2002 contract climbed during the day, recovering from overnight losses to close 0.42% stronger at an intraday high of 18,070 yuan/mt. Resistance at the five-day moving average will come under scrutiny tonight.

Lead: The most active SHFE 2002 contract hovered in an 80 yuan/mt range around 15,040 yuan/mt during the day, and closed 1.28% higher at 15,070 yuan/mt. The gains were driven by short-covering, as the price spreads between primary and secondary lead narrowed and due to tight primary lead availability. This, however, is unlikely to be a sustained rally as the absence of improvement in fundamentals will sideline longs. SHFE lead is expected to be constrained by the 20-day moving average tonight.

Nickel: The most traded SHFE 2002 contract rebounded, increasing 0.73% on the day to end at 110,880 yuan/mt. It has shrug off a resistance confluence of the five- and 20-day moving averages, and pressure at the middle Bollinger band will come under scrutiny tonight.

Tin: Longs pushed the most traded SHFE 2002 contract to a two-month high of 140,530 yuan/mt in early morning trade, before the contract eased to end the day 0.46% higher at 140,100 yuan/mt.