SMM Morning Comments (Apr 27)

Published: Apr 27, 2018 09:49

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SMM Morning Comments

SHANGHAI, Apr 27 (SMM) –

Copper: LME copper rebounded from a low and traded rangebound overnight. Technically, it continued to stand above all moving averages with sufficient support but its trading level dipped. The SHFE 1806 contract came off a high with support at the 10-day moving average and resistance at the five- and 60-day moving averages. We expect LME copper to trade at $6,900-6,960/mt today with the SHFE 1806 contract at 51,400-52,000 yuan/mt. Spot premiums are seen lower at 190-250 yuan/mt as sellers are keen complete transactions on the last trading day before the value-added tax (VAT) cut takes effect on May 1.

Aluminium: LME aluminium surged to a high of $2,316/mt overnight following talk that Oleg Deripaska, Rusal’s major shareholder, plans to maintain control of Rusal. We expect it to trade strongly rangebound at $2,220-2,350/mt today. Buoyed by its LME counterpart, the SHFE 1806 contract also jumped to a high of 14,555 yuan/mt after night trading session opened. It then lost some gains with resistance at the five-day moving average and the 14,500 yuan/mt level as longs and shorts exited the market. We expect it to trade rangebound at 14,450-14,580 yuan/mt today with spot discounts at 70-30 yuan/mt.

Zinc: LME zinc broke the $3,100/mt level downwards after LME inventories grew 18,675 mt. It then rebounded and consolidated around the $3,135 level, driven by the surge in LME aluminium prices. We see bearish sentiment unchanged given the sharp increase in zinc inventories and expect LME zinc to trade at $3,100-3,150 yuan/mt today. The SHFE 1806 contract traded firmly overnight but met strong pressure at the 24,000 yuan/mt level. We see limited upward room for it and expect it to trade at 23,600-24,100 yuan/mt today. The 0# common brands are likely to trade at premiums of 190-220 yuan/mt against the 1805 contract, with Shuangyan at premiums of 200-240 yuan/mt.

Nickel: LME nickel rose to a high of $14,300/mt near closing overnight as aluminium prices rebounded. This followed a dip to a low of $10,450/mt on a higher US dollar. It is likely to hover at high levels with support from several moving averages. The SHFE 1807 contract climbed up overnight as investors added their long positions. We see it facing pressure as domestic stainless steel inventory depletes slowly. The contract is expected to trade at 102,500-104,800 yuan/mt today with spot prices at 102,000-104,300 yuan/mt.

Lead: LME lead closed higher overnight, with bullish sentiment bolstered by a strong LME zinc and by a decline of 1,050 mt in LME lead inventory. We see strong pressure at the $2,350/mt level today. Buoyed by its LME counterpart, the SHFE 1806 contract rose to a high of 18,280 yuan/mt as longs added their positions and shorts reduced their positions. It tested the 18,300 yuan/mt level three times but failed to rise above. We expect it to test similar levels again today.

Tin: Both LME and SHFE tin gained overnight with SHFE tin rose at a faster rate to hit a high at nearly 148,000 yuan/mt. We see SHFE tin trading at 147,000-148,500 yuan/mt today. Spot prices are expected at 145,000-147,000 yuan/mt with thin trading before the Labour Day holiday.

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Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

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