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SMM Morning Comments (May 4)

iconMay 4, 2018 09:57
SMM Morning Comments


Copper: Technically, LME copper struggles at the 40-day moving average with support at the five-day moving average. With weak support, the SHFE 1807 contract failed to stand above the moving averages. We expect copper prices to stabilise today with LME copper trading at $6,830-6,890/mt and the SHFE 1807 contract at 51,000-51,500 yuan/mt. Spot discounts are seen similar to the previous day at 60-10 yuan/mt.

Aluminium: LME aluminium traded around the 20-day moving average overnight and we expect it to trade at $2,260-2,320/mt today. The SHFE 1807 contract came off to a low of 14,560 yuan/mt from a high of 14,735 yuan/mt overnight following its falling LME counterpart. As shorts and longs closed out their positions, it pared some losses and closed at 14,590 yuan/mt. We see limited upward room for SHFE aluminium and expect it to trade at 14,500-14,700 yuan/mt today. Spot discounts are seen at 70-30 yuan/mt.

Zinc: With weak fundamentals, LME zinc tumbled to a low of $2,994/mt at one point overnight due to the sell-offs by shorts. We expect it to trade at $2,990-3,040/mt today. SHFE zinc barely performed better. The sell-off also dragged the 1807 contract down to a low so far this year, with a lack of support on the technical front. We expect it to end the decline and consolidate at 22,900-23,400 yuan/mt today. The 0# common brands are likely to trade at premiums of 210-250 yuan/mt over the SHFE 1806 contract with Shuangyan at premiums of 220-270 yuan/mt.

Nickel: LME nickel jumped to a high of $14,200/mt last night as market sentiment improved on the potential easing of US-Sino trade tension. However, this was followed by a drop as LME nickel inventory grew by 8,934 mt, the biggest one-day increase since the same period in 2016. China’s domestic stainless steel inventory dipped month on month. LME nickel is expected to trade rangebound today. The SHFE 1807 contract tumbled as the US dollar hovered at highs. The contract is likely to trade at 103,000-105,000 yuan/mt today with spot prices at 102,500-104,800 yuan/mt.

Lead: LME lead saw weak movement overnight. We see such patterns in the short term and expect LME lead to consolidate today. Following the movement of its LME counterpart, SHFE lead hovered around the daily moving average with wide ranges. We expect the contract to test support at the 18,500 yuan/mt level today.

Tin: LME tin rose above the moving averages overnight, but met resistance at $21,700/mt. The SHFE 1809 contract broke resistance of all moving averages overnight as longs significantly added their positions. Fundamentals gained some support from worries over short supplies as domesticsupplies of tin ore tightened. We see SHFE tin trading at 147,000-149,000 yuan/mt today with spot prices at 146,000-147,500 yuan/mt.


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