SMM Morning Comments (May 21)

Published: May 21, 2018 10:02

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SMM Morning Comments

SHANGHAI, May 21 (SMM) –

Copper: Suppressed by the strong US dollar, the trading level of copper prices dipped. LME copper struggled among all the moving averages with strong pressure at the 60-day moving average, while the SHFE 1807 contract struggled between the five- and 10-day moving averages with support at the 40-day moving average. We expect LME copper to trade at $6,820-6,870/mt today with SHFE 1807 at 50,900-51,400 yuan/mt. Spot discounts are seen at 80-20 yuan/mt.

Aluminium: Russian oligarch Oleg Deripaska quit the boards of EN+ and its subsidiary Rusal on Friday, suggesting the sanctions on Rusal are likely to ease. We see resistance at the $2,300/mt level for LME aluminium and expect it to trade at $2,250-2,295/mt today. The SHFE 1807 contract touched a low of 14,750 yuan/mt last Friday night as shorts sold at high levels. It then rebounded to 14,790 yuan/mt as shorts suspended their sell-off. We expect SHFE aluminium to test support at the 10- and 20-day moving averages today with a trading range at 14,650-14,850 yuan/mt. Spot discounts are seen at 100-60 yuan/mt.

Zinc: LME zinc prices were firm last Friday night and rose to a high of $3,100/mt. However, it is likely to face pressure from a stronger US dollar and to hover between the 10- and 20-day moving averages today, trading at $3,065-3,115/mt. The SHFE 1807 contract also traded with strong momentum last Friday night and broke pressure from the 20-day moving average. It is expected to trade at 23,600-24,000 yuan/mt today with pressure at 24,000 yuan/mt.

Nickel: The SHFE 1807 contract initially traded weakly along the daily moving average last Friday night. Dragged by its LME counterpart, it then tumbled to a low of 108,480 yuan/mt, but found some support at the five-day moving average. The pressure from the strong US dollar is likely to be eased by the destocking of domestic and LME nickel inventories as well as the upbeat downstream stainless steel consumption. We expect LME nickel to be strongly rangebound today with SHFE nickel relatively weak. The SHFE 1807 contract is likely to trade at 108,100-110,100 yuan/mt today with spot prices at 107,600-109,600 yuan/mt.

Lead: LME lead tumbled to a low of $2,348.5/mt during the European trading hours last Friday given the 1,700 mt increase in LME lead inventories as well as the stronger US dollar. It then continued to fall and closed at $2,335.5/mt as shorts added their positions. We see some support at the 10-day moving average for LME lead. The SHFE 1806 contract came off from a high of 19,765 yuan/mt last Friday as longs exited the market at high prices. As its LME counterpart fell, it extended its decline and closed at 19,625 yuan/mt. We expect SHFE lead to consolidate at highs today.

Tin: LME tin mostly traded weakly during last Friday as the US dollar index strengthened. It is likely to remain weak in the short term but with support at $20,600/mt. The SHFE tin 1809 contract also faced pressure on Friday. The contract is expected to trade at 144,300-145,600 yuan/mt today.

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copper aluminium nickel zinc lead tin

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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