SMM Morning Comments (Apr 19)

SHANGHAI, Apr 19 (SMM) –

Copper: A strong LME copper provided support to SHFE copper overnight. Technically, LME copper stood above 10-day moving average and tested above the 60-day moving average. It is likely to trade at $7,000-7,060/mt with the SHFE 1805 contract at 51,500-52,000 yuan/mt today. As prices of futures gained, spot prices offered are likely to dip with premiums expected at 0-50 yuan/mt.

Aluminium: LME aluminium registered a fresh high since August 2011 at one point overnight. We see considerable upward room for it given the sweeping influence from US sanctions on Rusal and the potential production cut. We expect it to strongly trade at $2,540-2,600/mt today. Limited by domestic fundamentals, SHFE aluminium performed relatively weakly overnight, compared to its LME counterpart, and traded at 15,145-15,290 yuan/mt. The SHFE/LME ratio recorded a new low of six. We expect the SHFE 1806 contract to trade at 15,100-15,300 yuan/mt today, with spot discounts at 80-40 yuan/mt.

Zinc: Most base metals rose overnight, driven by US sanctions on Russia and as US-Sino trade tension eased. LME zinc also surged due to the strength of nickel prices, but met apparent pressure at $3,300/mt. We see it trading at $3,230-3,280/mt today. SHFE zinc covered lost ground overnight to close at 24,645 yuan/mt. It is likely to trade at 24,350-24,850 yuan/mt today.

Nickel: LME nickel saw a gain of 7% overnight as the market worried about US sanction on Russian nickel. It is likely to hover at high levels today. SHFE nickel will lack support in the short run due to sluggish demand for stainless steel in the domestic market. The SHFE 1807 contract is seen trading at 106,000-108,000 yuan/mt with spot prices at 105,500-107,500 yuan/mt today.

Tin: LME tin came off from $21,650/mt, a high since early March, overnight. As Indonesian tin miner Timah suspended its export business in early March and tin ingot exports from Myanmar declined, supplies of raw material  in China were affected and fundamentals gained support. LME tin opened high at $21,575/mt today. We expect it to trade at high levels in the short term with resistance at $21,800/mt. SHFE tin also fell after a sharp jump overnight and was constrained by the resistance at the 60-day moving average when closing. We expect it to trade rangebound at 145,000-146,000 yuan/mt today.

Lead: LME lead met pressure at $2,400/mt after it surged 12% overnight due to concerns about US sanction on Russian nickel. It is likely to fall from highs with continuous resistance at $2,400/mt today. As most base metals gained, the SHFE1806 contract rose to a high of 18,530 yuan/mt with pressure at the 40-day moving average. It is seen testing support of the 10-day moving average today.

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