SMM Morning Comments (May 11)

SHANGHAI, May 11 (SMM) –

Copper: The US dollar fell as the US consumer-price inflation growth for April missed expectations. Crude oil prices extended its gains as closing prices registered a new high since 2014, and this buoyed copper prices. LME copper surged overnight with a higher trading range, and now stands among moving averages. The SHFE 1807 contract climbed above the 20-day moving average overnight. We expect LME copper to trade at $6,880-6,930/mt today with SHFE 1807 contract at 51,300-51,800 yuan/mt. Spot premiums are seen lower at 0-70 yuan/mt as prices of futures rise.

Aluminium: With a surge in positions, LME aluminium fluctuated significantly and closed at a low level overnight. As shorts are in a more advantageous position than longs, we expect LME aluminium to test support of $2,300/mt at the 20-day moving average today with a trading range at $2,300-2,340/mt. The SHFE/LME ratio stood at 6.37. Compared with its LME counterpart, we see more support for the SHFE 1807 contract. We expect the contract to trade rangebound among the five-, 10- and 20-day moving averages today with a range at 14,600-14,770 yuan/mt. Spot prices are seen at a discount of 20 yuan/mt to a premium of 20 yuan/mt.

Zinc: LME zinc traded rangebound overnight while most longs closed out their positions above the $3,100/mt level. We expect it to trade weakly in the short term and to move at $3,065-3,215/mt today with no clear directions from fundamentals. The SHFE 1807 contract broke through several moving averages to a new low of 23,605 yuan/mt overnight. It is likely to continue its weak pattern at 23,450-23,950 yuan/mt today. The 0# common brands are likely to trade at premiums of 50-100 yuan/mt over the SHFE 1806 contract, with Shuangyan at premiums of 70-110 yuan/mt.

Nickel: Pressure on base metals eased as the US dollar weakened overnight. We see limited upward momentum for both LME and SHFE nickel with several moving averages above. We expect LME nickel to continue its weak, rangebound pattern today and the SHFE 1807 contract to trade at 103,100-104,400 yuan/mt. Spot prices are seen at 102,600-103,900 yuan/mt.

Lead: LME lead inched up overnight on the weakened US dollar as US inflation data failed to meet expectations. With continuous pressure above, it is expected to follow the movement of SHFE lead during the day. The SHFE 1806 contract stood above the 19,000 yuan/mt overnight with support from longs. We expect it to strengthen further today.

Tin: As inventories surged, LME tin tumbled to a two-month low of $20,605/mt at one point overnight. We expect it to test support at $20,600/mt today. Dragged by its LME counterpart, the SHFE 1809 contract opened low and traded rangebound at the 145,400 yuan/mt level with its trading level down. We see support at 145,000 yuan/mt and 144,000 yuan/mt. Spot prices are seen lower at 143,000-145,000 yuan/mt as prices of futures fell. Short supplies in the market will ease as Indonesia's largest tin miner PT Timah resumes exports in the middle of May.

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