SHANGHAI, Sep 25 (SMM) –
Copper: While LME copper came off from earlier highs, it still stood above the 60-day moving average overnight. Global visible inventories extended their declines last week with SHFE stocks down 23,500 mt to 111,000 mt. Such low inventories could provide some support to copper prices. The SHFE 1811 contract is likely to pull back in the short term after it broke through the upper Bollinger band on Friday. Spot premiums are seen at 80-130 yuan/mt.
Aluminium: We expect LME aluminium to trade at $2,045-2,065/mt today and the SHFE 1811 contract to trade rangebound at 14,650-14,780 yuan/mt. Spot discounts are seen at 50-10 yuan/mt. Market participants should monitor investors’ reaction to the news that Rusal seeks to establish trading team in China. On the costs front, we see limited downward room for alumina prices given shortages of bauxite supply in the Chinese market. Hydro’s Alunorte is unlikely to resume full output within this year. Such a supply shortage abroad opens an export arbitrage window and encourages Chinese exporters to sell alumina to the international market. On the supply side, the pace of commissioning new capacity is slow and some 800,000 mt/year of capacities were shut down in July-September. On the demand side, orders in some sectors improved in September.
Zinc: With resistance at the upper Bollinger band and bounce in the dollar, LME zinc erased most of its earlier gains overnight. We expect it to hover around the 60-day moving average today with a trading range of $2,500-2,550/mt. We expect a strong performance for the SHFE 1811 contract today with a trading range of 21,400-21,900 yuan/mt.
Nickel: LME nickel plunged to $12,780/mt overnight before it hovered around $12,825/mt. We expect a weak performance for the SHFE 1811 contract today given its weak LME counterpart and growing supplies amid an open import arbitrage window. LME nickel is likely to hover around $12,850/mt today; the SHFE 1811 contract is likely to trade at 103,000-104,500 yuan/mt with spot prices at 103,500-110,000 yuan/mt.
Lead: LME lead reversed its earlier gains overnight as it met pressure at the 40-day moving average and as the US dollar index rebounded. Open interest for the contract shrank sharply as anticipation of a weakening SHFE lead drove investors to liquidate their positions on risk aversion. We expect LME lead to remain rangebound at low levels today.
Tin: LME tin dipped over the Mid-Autumn holiday. We see it remain in a rangebound pattern with support at $18,600/mt. Resistance is seen at the 20-day moving average for the SHFE 1901 contract. If it can break that resistance, it is likely to climb to 150,000 yuan/mt; if it fails, it is likely to flip into a rangebound pattern.
