SMM Morning Comments (Nov 23)

SHANGHAI, Nov 23 (SMM) – 

Copper: Rising longs buoyed prices of LME copper and the SHFE contracts on a softened US dollar. LME copper rose above the five-day moving average and closed at the highest overnight at $6,267/mt. The SHFE 1901 contract ended three consecutive trading days of decline as it closed at 49,660 yuan/mt after rising to a high of 49,680 yuan/mt. We expect it to trade at 49,400-49,800 yuan/mt today with LME copper trading at $6,220-6,270/mt. Tight supplies in domestic market will keep spot premiums at 50-120 yuan/mt. 

Aluminium: The SHFE 1901 contract extended its daytime increase overnight and jumped to a high of 13,865 yuan/mt. As some longs took profits and left, it settled at 13,830 yuan/mt, with open interest up 670 lots to 257,780 lots. We expect the rise unlikely to sustain today as demand cooled, reflected in a slower decline in domestic social stocks of primary aluminium. The contract will trade at 13,850-13,750 yuan/mt today with spot discounts at 60-20 yuan/mt. Upward momentum is seen in LME aluminium in the short run, as concerns over slow pace in interests rate hikes by US Fed will weigh on the dollar. It is expected to trade at $1,940-1,970/mt today. 

Zinc: Improving fundamentals supported LME zinc to break pressure at the five-day moving average, and to rise to a high of $2,594/mt. It is expected to continue to test pressure above at the 40-day moving average, trading at $2,560-2,610/mt today. The SHFE 1901 contract received support at 21,000 yuan/mt, and grew 0.57% higher on the day to settle at 21,145 yuan/mt. However, weak consumption amid low-level inventories will provide limited upward momentum in prices. We expect the contract to hover within a broad range of 20,900-21,300 yuan/mt today. 

Nickel: Macro pessimism continued to lower LME nickel and the SHFE 1901 contract overnight, by 0.63% and 1.14%, respectively. Weak fundamentals failed to provide the contract effective support at the 90,000 yuan/mt level. We expect LME nickel to hover weakly around $10,900/mt, with the 1901 contract trading at 89,500-91,000 yuan/mt today. Spot prices are seen at 90,000-101,500 yuan/mt today.

Lead: While LME lead came off from highs on accumulated shorts, the SHFE 1901 contract climbed on the day as investors added their longs. Open interests in the contract rose more than 7,300 lots during Wednesday and Thursday. We expect it to have further upward room, while its LME counterpart will have to struggle to maintain its momentum.  

Tin: LME tin traded weakly overnight and approached the 40-day moving average below. It will test support at $19,000/mt today. The SHFE 1901 contract registered a sharp decline of 1.19% with open interests losing 1,686 lots. It closed at 147,090 yuan/mt, around the 60-day moving average. We see it testing support at that level today.