SMM Morning Comments (Sep 28)

SHANGHAI, Sep 28 (SMM) –

Copper: LME copper fell to close at $6,179/mt overnight and the SHFE 1811 contract slid as longs cut their positions. Support from the fundamentals front weakened on lowering spot premiums, improving copper scrap consumption and weaker-than-expected preholiday stockpiling. Investment growth in infrastructure construction and utilities is unlikely to substantially lift copper prices in the short term. Spot premiums are seen at 0-40 yuan/mt today.

Aluminium: LME aluminium was dragged down by its SHFE counterpart to a low of $2,025/mt overnight, after it rebounded to $2,060/mt. It settled at that lowest level overnight, with trading range expected at $2,025-2,045/mt today. The SHFE 1811 contract slumped to a two-month low of 14,275 yuan/mt and touched the Bollinger lower band. Open interests lost 4,030 lots overnight. The contract is likely to hover at lows before the National Day holiday. Its trading range today is set at 14,300-14,400 yuan/mt, with spot discounts at around 30 yuan/mt.

Zinc: LME zinc fluctuated to close at $2,516/mt overnight. The widening 0-3 month spread is likely to weigh on LME zinc. We expect it to trade at $2,490-2,540/mt today. The SHFE 1811 contract recovered most of its earlier losses to end at 21,540 yuan/mt overnight. Spreads between the October and November contracts widened to 940 yuan/mt, suggesting a supply gap for October delivery. We expect the 1811 contract to trade at 21,300-21,800 yuan/mt today.

Nickel: LME nickel fell overnight until it found some support at $12,500/mt. The SHFE 1811 contract rebounded close to the daily moving average after dropping to a low 102,680 yuan/mt. Inflows of Russian nickel grew supplies in the domestic market and this limited upward momentum in futures. LME nickel is likely to hover around $12,600/mt today. The SHFE 1811 contract is expected to remain rangebound in the short term and to trade at 103,000-104,500 yuan/mt today. Spot prices are seen at 103,500-110,000 yuan/mt.

Lead: While LME lead snapped its losing streak and closed at $2,003/mt overnight, it remained under pressure at several moving averages. It is likely to trade rangebound in the short term. The SHFE 1811 contract also stemmed its declines and climbed into the black by close overnight. But it still faces pressure at several moving averages. It is likely to finish the last trading day before the 9-day closure of the market by trading rangebound.

Tin: LME tin climbed during the Asian trading hours as it SHFE counterpart rose, but it lost those gains during the European trading session, as the dollar surged, and ended at $18,885/mt overnight. We expect it to remain rangebound in the short term. The SHFE 1901 contract failed to continue its daytime strong performance overnight as short-term longs took profits and liquidated their positions. We expect it to trade rangebound today with resistance at 148,500 yuan/mt.