SMM Morning Comments (May 2)

SHANGHAI, May 2 (SMM) –

Copper: LME copper fell under the pressure of stronger US dollar during the Labour Day holiday. Technically, it now stands below all moving averages and without support. We expect it to trade at $6,740-6,800/mt today with the SHFE 1806 copper at 51,000-51,500 yuan/mt. Spot discounts are seen at 100-50 yuan/mt with May invoices.

Aluminium: LME aluminium is expected to trade rangebound at $2,235-2,270/mt today if there is no further development on the Rusal sanctions. As SHFE aluminium’s five-, 20-, 40- and 60-day moving averages moved towards one another and developed trading ranges, we expect the contract to trade at 14,350-14,550 yuan/mt today with spot discounts at 100-60 yuan/mt.

Zinc: LME zinc traded weakly and broke the final support at the lower Bollinger band. Its trading level fell but it remained at the psychological level of $3,100/mt. We expect it to test higher levels and trade at $3,050-3,100/mt today. SHFE zinc is likely to fall given the weak performance of its LME counterpart during the Labour Day holiday. The SHFE 1806 contract is expected to trade at 23,550-24,000 yuan/mt today. The 0# common brands are likely to trade at premiums of 150-200 yuan/mt with Shuangyan at premiums of 160-220 yuan/mt.

Nickel: LME nickel received support from the 60-day moving average overnight after it dipped to a low of $13,555/mt as the US dollar gained. We see it trading rangebound and seeking support from moving averages below today. As prices of stainless steel still face pressure in the domestic market, and the nickel downstream PMI is expected to shrink further in May from 45.7 in April, we see SHFE nickel 1807 contract trading at 101,000-103,000 yuan/mt today. Spot prices are seen at 100,500-102,500 yuan/mt.

Lead: LME lead edged down with pressure from several moving averages above during the past two days. We see it trading rangebound today. Investors should be prepared for it to be dragged down further by a stronger US dollar.

Tin: We expect LME tin to remain its rangebound pattern under pressure from the stronger US dollar. We also see SHFE tin trading rangebound under pressure at 146,000-148,000 yuan/mt. In the physical market, market participants should monitor the growth of supplies in the market after the value-added tax (VAT) cut took effect on May 1. We expect spot prices to move in line with futures prices at 145,000-147,000 yuan/mt today.

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