SMM Morning Comments (Oct 15)

SHANGHAI, Oct 15 (SMM) –

Copper: LME copper reversed some early gains on Friday as the dollar climbed. The SHFE 1812 contract on Friday night fell below the daily moving average and ended at 50,720 yuan/mt after it rose to a high of 51,090 yuan/mt. Copper prices recovered as the markets settled from the US equity rout. LME copper stood above the 20-day moving average as its MACD red line changed little. Its SHFE counterpart broke through the five-day moving average to test the upper Bollinger band. Spot premiums are likely to widen after delivery. Low stocks and anticipation of brisk downstream demand are likely to provide some support to copper prices. LME copper is expected to trade at $6,270-6,330/mt today with the SHFE 1812 contract at 50,400-51,000 yuan/mt. Spot premiums are seen at 40-100 yuan/mt.

Aluminium: The SHFE 1812 contract remained in the black but fell to 14,280 yuan/mt at closing after it climbed to a high of 14,375 yuan/mt on Friday night. LME aluminium retreated from early highs to close at $2,030.5/mt on Friday. The US Treasury said on Friday that it would push back until December 12 a deadline to wind up contracts and business with Rusal. This is likely to weigh on aluminium prices today. We expect the SHFE 1812 contract to trade at 14,200-14,350 yuan/mt with spot discounts at 60-20 yuan/mt. We expect LME aluminium to trade at $2,010-2,050/mt today.

Zinc: As the dollar rebounded, LME zinc stemmed its early increases and traded rangebound to close at $2,638.5/mt on Friday. Given pressure at the five- and 10-day moving averages as well as from the dollar's strength, the contract is likely to consolidate at $2,600-2,650/mt today. The SHFE 1811 contract saw its trading level nudge up on Friday night with session lows near the five-day moving average. The contract is likely to trade rangebound under pressure today as the October contract is about to expire. We see the contreact trading at 22,500-23,000 yuan/mt.

Nickel: In late trading on Friday, LME nickel lost all the gains it made earlier in the day and fell to a low of $12,610/mt before hovering around $12,670/mt and settling at $12,685/mt. The SHFE 1811 contract on Friday night rebounded to hover around 105,000 yuan/mt and end at 104,950 yuan/mt after it fell to a low of 104,430 yuan/mt. SHFE nickel prices are likely to remain rangebound as supply and demand both grow. LME nickel is expected to hover around $12,650/mt today and the SHFE 1811 contract is expected to trade at 104,000-106,000 yuan/mt. Spot prices are seen at 104,000-111,000 yuan/mt.

Lead: On Friday, institutional longs pushed up LME lead past all the moving averages to a high of $2,076.5/mt before some longs booked profits and the contract closed at $2,046/mt. The contract increased significantly for two consecutive days and is likely to try to stand above $2,100/mt today. The strong LME lead drove the SHFE 1811 contract to open higher and climb towards the 19,000 yuan/mt level on Friday night. With massive sell-offs, the contract then retreated from early highs to the daily moving average and ended at 18,890 yuan/mt. The contract posted a six-day winning streak. Market participants should monitor the 19,000 yuan/mt level in the short term.

Tin: On Friday, LME tin failed to continue the uptrend seen in the previous day and traded rangebound between the five- and 60-day moving averages. It is likely to remain rangebound today with resistance at $19,300/mt. The SHFE 1901 contract traded rangebound above several moving averages on Friday night. Resistance is seen at 149,000 yuan/mt and support is at 146,500 yuan/mt.