SMM Morning Comments (May 16)

SHANGHAI, May 16 (SMM) –

Copper: Base metals faced resistance as US Treasury yields touched a seven-year high and as the US dollar strengthened last night. LME copper lacked upward momentum after it rose to a high of $6,905/mt, and fell to a low of $6,765/mt as the US dollar gained. The SHFE 1807 contract also dipped overnight as its LME counterpart weakened. The contract is likely to trade weakly in the short term with pressure from declining consumption in the upcoming low season. Growing copper inventories across SHFE warehouses in the last two weeks will also account for the SHFE 1807 trading weakly. 

Aluminium: LME aluminium received support and rebounded to close at $2,322/mt after it fell to a low of $2,274/mt last night. It is expected to trade rangebound with downward room today as the US dollar strengthened. The SHFE 1807 contract regained most losses overnight to close at 14,715 yuan/mt with support from the five- and 10-day moving averages. Open interest of SHFE aluminium shrank 68,080 lots to 653,246 lots, falling to a record low since July 2017. The contract is likely to hover at 14,650-14,750 yuan/mt with spot discounts at 70-30 yuan/mt today. 

Zinc: With pressure from the rising US dollar and Treasury yields, LME zinc dipped to a low of $3,044/mt after it rose to a high of $3,089.5/mt last night. It is likely to lack strong upward momentum and to trade at $3,030-3,080/mt today. The SHFE zinc 1807 contract mostly hovered at 23,680 yuan/mt and was not significantly affected by its LME equivalent. The contract is expected to trade at 23,450-23,850 yuan/mt as most investors take a wait-and-watch stance. 

Nickel: As the US dollar rebounded above 93, LME nickel tumbled to a low of $14,205/mt during the European trading period overnight. It then gained support from the 20-day moving average and consolidated around the daily moving average. The SHFE 1807 contract surged to a high of 107,770 yuan/mt from a low of 106,210 yuan/mt overnight. We expect LME nickel to trade weakly rangebound today and the SHFE 1807 contract to move at 106,000-108,000 yuan/mt with spot prices at 105,500-107,500 yuan/mt.

Tin: The trading level of LME tin dipped below the five-day moving average overnight, while the SHFE 1809 contract traded rangebound below several moving averages. We expect the contract to continue its rangebound pattern under pressure today with a trading range of 145,000-146,500 yuan/mt.

Lead: Overnight, LME lead lost its gains during the previous day with support at the five-day moving average. It is expected to trade rangebound around the five-day moving average today. The SHFE lead 1806 contract dipped twice to around 19,250 yuan/mt overnight but received considerable support. It is likely to test support at the five-day moving average with upward room today. 

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