SMM Morning Comments (Mar 8)

SHANGHAI, Mar 8 (SMM) – 

Copper: LME copper failed to stand firm at highs after it rose to the highest overnight at $6,450.5/mt, as the US dollar strengthened and shorts entered. It ended at $6,435/mt, with open interests up 1,018 lots to 298,000 lots. The SHFE 1905 contract unsuccessfully tested pressure from the daily moving average for several times, before it dropped to a low of 49,020 yuan/mt. It lost support from the 20-day moving average and closed at 49,160 yuan/mt. Today, we see it trading at 49,000-49,500 yuan/mt, with LME copper at $6,400-6,450/mt. Spot sellers are likely to expand discounts to 140 yuan/mt as a wider backwardation in copper futures deters purchases. 

Aluminium: LME aluminium rebounded after it dipped to a low of $1,857/mt, but a robust US dollar limited its upward momentum and ended it at $1,863/mt. As shorts exited, the SHFE 1905 contract inched up overnight, with the K-line testing pressure at the 20-day moving average. The contract is likely to trade at 13,400-13,600 yuan/mt, with LME aluminium at $1,840-1,890/mt today. Spot discounts are set at 50-10 yuan/mt. 

Zinc: A stronger US dollar dragged LME zinc below the five- and 10-day moving averages last night. It failed to find support at $2,750/mt, and closed 1.78% lower on the day at $2,735/mt. LME zinc inventories expanded but remained at record lows in over 10 years. The SHFE 1905 contract fell below the 20-day moving average, pressured by domestic high stocks and tepid demand. As investors remain cautious, the contract may trade at 21,150-21,650 yuan/mt today, with LME zinc at $2,720-2,770/mt. 

Nickel: A stronger US dollar and news of a domestic expansion of nickel pig iron (NPI) capacity lowered LME nickel by 3.04% and the SHFE 1905 contract by 2.49%, despite the current shortage of NPI in domestic markets. Slow trades of stainless steel this week also depressed nickel prices. Today, we expect the 1905 contract to trade weakly at 102,000-103,000 yuan/mt, with spot prices at 104,200-105,300 yuan/mt. 

Lead: LME lead consolidated around the daily moving average for the third consecutive trading day, as it closed higher overnight at $2,103.5/mt. We expect it to fall below current support if the US dollar continues to climb. The SHFE 1904 contract rallied to the daily moving average after it slid to a low of 17,395 yuan/mt. It is likely to face continued pressure today as the five-day moving average traded at lower levels.

Tin: Pressure from the five- and 10-day moving averages above, and rising shorts weighed LME tin to a low of $21,365/mt during the European trading session, and ended it at $21,485/mt. It will trade with support at $21,300/mt today. The SHFE 1905 contract tested support at the 60-day moving average as it declined to a low of 147,620 yuan/mt. We expect it to continue to test support below at 147,500 yuan/mt today.