SMM Morning Comments (Nov 7)

SHANGHAI, Nov 7 (SMM) – 

Copper: Caution ahead of the US midterm elections lowered most base metals. LME copper slumped after it rose, and ended Tuesday below the Bollinger middle band at $6,143.5/mt. The SHFE 1901 contract also fell below the 10-day moving average and approached the Bollinger lower band. It closed at 49,250 yuan/mt after falling to a low of 49,210 yuan/mt overnight. We expect it to trade at 49,000-49,500 yuan/mt today with its LME counterpart trading at $6,110-6,170/mt. Spot premiums will be firmed up to 10-50 yuan/mt as trades improve. 

Aluminium: Shorts dragged the SHFE 1901 contract below the daily moving average, to a low of 13,835 yuan/mt. Lacking effective support below, it is likely to trade at 13,800-13,950 yuan/mt today. Weak fundamentals also weighed LME aluminium to the lowest since early August last year of $1,950.5/mt. Open interests lost 2,083 lost to 675,000 lots. We expect it to trade at $1,940-1,990/mt today. 

Zinc: As hesitant investors cut their longs, LME zinc failed to rebound above $2,550/mt and slumped to a low of $2,481/mt. It lost all the technical support below overnight, closing at $2,484/mt. While LME zinc inventories remained near year-lows, expectations of growing supplies will extend the weak trend in prices. LME zinc is expected to again test resistance above at $2,500/mt and trade at $2,480-2,530/mt today, with the SHFE 1901 contract trading at 20,700-22,200 yuan/mt. Last night, weak consumption and pressure from shorts lowered the 1901 contract, which lost 355 yuan/mt from Monday to settle at 20,855 yuan/mt. 

Nickel: While LME nickel settled 0.47% higher overnight, slow downstream consumption limited upward momentum for prices. It is expected to hover around $11,800/mt today with the SHFE 1901 contract trading at 97,000-98,500 yuan/mt. Spot prices are likely at 98,000-107,000 yuan/mt today. 

Lead: As shorts dominated the market, LME lead lost support at $1,935/mt and fell to a low of $1,905/mt. We expect the $1,900/mt level will provide limited support today. The SHFE 1812 contract slid in line with its LME counterpart and slumped below the 20-day moving average. Macroeconomic uncertainty will extend the weak trend in prices today. 

Tin: LME tin will test support at $19,000/mt in the short run affected by global trade dispute. While trades in tin verified by Surveyor Indonesia halted from October 26, LME tin failed to receive strong support, and closed slightly lower from Monday at $19,015/mt last night. Limited supplies in the Shanghai market buoyed the SHFE 1901 contract, which grew slightly to close at 146,000 yuan/mt. Pressure above is set at 147,000 yuan/mt today.