SMM Morning Comments (Jan 14)

SHANGHAI, Jan 14 (SMM) –

Copper: London copper prices climbed to an eight-month peak on Monday as investors awaited the signing of a US-China Phase 1 trade deal. Three-month LME copper hit its highest since May at $6,298.5/mt, before it closed the trading day 1.42% stronger at $6,291.5/mt. The most active SHFE 2003 contract gained 0.92% in overnight trading session to end at 49,370 yuan/mt. Optimism over US-China relations and easing fears of an all-out conflict in Middle East will boost market sentiment and support copper prices in the short run. LME copper is expected to move between $6,260-6,310/mt today, with SHFE copper at 49,200-49,500 yuan/mt. Spot prices are seen at a discount of 20 yuan/mt to a premium of 30 yuan/mt.

Aluminium: Three-month LME aluminium retreated to its lowest in more than a week at $1,788.5/mt in European trading hours, before it recovered some ground to close the trading day 0.77% weaker at $1,798/mt. LME aluminium has given back all the gains from the previous two days, and is expected to trade between $1,780-1,810/mt today. The most traded SHFE 2003 contract shed 0.32% in overnight trading session to end at 13,960 yuan/mt. Some shorts may move to the March contract as the January one is about expire. This, coupled with softer consumption and higher inventories, will weigh on the SHFE 2003 contract, which is likely to move at 13,900-14,100 yuan/mt today. Spot discounts are seen at 100-80 yuan/mt over the SHFE 2001 contract.

Zinc: Three-month LME zinc recovered from an earlier slip to close the trading day 0.27% firmer at $2,376/mt on Monday. Zinc inventories across LME warehouses extended their decline to 50,975 mt, while the discount for LME cash zinc against the three-month contract at $9.75 failed to attract more deliveries to the warehouses and suggested no shortage of nearby metal. LME zinc is expected to trade between $2,340-2,390/mt today. The most active SHFE 2003 contract followed its LME counterpart higher overnight, gaining 0.19% to end at 18,320 yuan/mt. SHFE zinc now faces resistance at the five-day moving average and the upper Bollinger band. SMM data on Monday showed that zinc social inventories in China rose 1,600 mt over the weekend, pointing to weakening consumption in the run-up to the Chinese New Year holiday. The SHFE 2003 contract is expected to trade at 17,900-18,400 yuan/mt today. Spot premiums for domestic 0# Shuangyan are seen lower at 80-110 yuan/mt over the SHFE 2001 contract.

Nickel: Three-month LME nickel eased off a three-week high on Monday, losing 0.88% on the trading day to $14,105/mt. Whether it could cling to $14,100/mt, where several moving average converge, will come under scrutiny today. The most traded SHFE 2003 contract was on the decline in overnight trading session, shedding 0.72% to 111,680 yuan/mt, near the five-day moving average. Whether support at several moving averages could prevent SHFE nickel from dropping further should be closely watched today.

Lead: Three-month LME lead slipped to a low of $1,903.5/mt on Monday, before it finished the trading day 0.78% lower at $1,913.5/mt. LME lead faces stiff resistance at $1,950/mt, while support at $1,900/mt will come under scrutiny in the near term. The most active SHFE 2003 contract shed 1.03% to 14,855 yuan/mt in overnight trading session, tracking losses in its LME counterpart and resuming a decline after a week-long rally. SHFE lead may extend the decline, given weak fundamentals.  

Tin: Three-month LME tin hit a four-month peak of $17,470/mt on Monday, before it erased some gains to end the trading day 0.78% higher at $17,400/mt. Resistance is seen at $17,500/mt. The unwinding of short positions took the most traded SHFE 2006 contract to end at a high of 138,950 yuan/mt overnight, gaining 1.08% from the settlement in the previous session. Support is seen at 137,500 yuan/mt, while resistance is at 139,500 yuan/mt.