SMM Morning Comments (Oct 11)

Published: Oct 11, 2018 09:41 (GMT+8)

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SMM Morning Comments

SHANGHAI, Oct 11 (SMM) –

Copper: Copper prices slid overnight as tumbles in European and American stocks rattled the market. LME copper dropped to a low of $6,223.5/mt and ended at $6,237/mt and the SHFE 1811 contract failed to remain at 51,000 yuan/mt. We expect LME copper to trade at $6,130-6,220/mt today with the SHFE 1811 contract at 50,150-50,700 yuan/mt. Spot discounts are seen up to 40 yuan/mt.

Aluminium: The SHFE 1811 contract fell and closed near its session lows overnight as its LME counterpart weakened and as the market priced in China’s fiscal stimulus including cuts in banks’ reserve requirement ratio and higher export tax rebates. SHFE aluminium is likely to remain weak in near term as support from alumina wanes and aluiminum consumption remains sluggish. The contract is expected to trade at 14,300-14,400 yuan/mt with spot discounts at 60-20 yuan/mt. LME aluminium fluctuated and posted a five-day losing streak on Wednesday with an extended MACD green line. A relatively firm dollar, some resumption of capacity at Hydro's Alunorte alumina refinery and dips in alumina prices overseas accounted for the recent weakness in LME aluminium. It is expected to trade at $2,000-2,060/mt today.

Zinc: On Wednesday,LME zinc lost the gains it made in the previous day. As tumbles in American stocks may grow cautious sentiment among investors, LME zinc is likely to trade under pressure today with a trading range of $2,570-2,620/mt. Weak performance in LME zinc also sent the SHFE 1811 contract to end in negative territory overnight. We see limited downward room for the contract given low levels of domestic stocks. It is likely to trade under pressure with a range of 22,350-22,850 yuan/mt.

Nickel: LME nickel tumbled past the 40- and five-day moving averages to a low of $12,685/mt in late trading on Wednesday. The SHFE 1811 contract fell to close at 105,130 yuan/mt overnight. Investors refocused on fundamentals front after positive news that nickel was voted as the most promising base metal for 2019 at this year's LME week in London. As supply and demand grew, LME nickel is expected to hover around $12,800/mt today with the SHFE 1811 contract trading at 104,500-106,500 yuan/mt. Spot prices are seen at 104,000-111,000 yuan/mt.

Lead: LME lead reversed early gains and fell to a new low since September 2016, at $1,903/mt in late trading on Wednesday. Given sharp declines, there could be limited upward correction in the short term. Market participants today should monitor support at $1,900/mt, a psychologically-significant level. The SHFE 1811 contract initially jumped overnight, lifted by news that environmental probes in Anhui would affect production. As longs booked profits, the contract pared some gains to close at 18,320 yuan/mt. While upbeat fundamentals domestically improved investor confidence, declines in the international stocks market are set to pressure SHFE lead.

Tin: LME tin remains in a rangebound pattern with resistance at $19,300/mt, even as it edged up on Wednesday. The SHFE 1901 contract traded rangebound overnight and is expected to continue this, with resistance at 148,000 yuan/mt and support at 146,000 yuan/mt.

Morning comments Copper Aluminium Zinc Lead Nickel 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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