SMM Morning Comments (Oct 22)

SHANGHAI, Oct 22 (SMM) –

Copper: LME copper stemmed its four-day losing streak on Friday October 19 but posted a weekly loss of 1.6%. LME inventories decreased 16,100 mt over the week to 154,000 mt, around record lows. The SHFE 1812 contract opened higher on Friday night and initially climbed to session highs of 50,500 yuan/mt. It then edged down to close at 50,260 yuan/mt. On the technical front, support is seen at the 40- and 60-day moving averages for LME copper and at the five-day moving average for SHFE copper. In the physical market, spot discounts narrowed ahead of the weekend. Seaborne materials have been depleted and traders have to fulfill long-term contracts this week. LME copper is expected to trade at $6,150-6,230/mt today with the SHFE 1812 contract at 49,900-50,500 yuan/mt. Spot prices are seen between discounts of 50 yuan/mt to premiums of 20 yuan/mt.

Aluminium: The SHFE 1812 contract received support at 14,000 yuan/mt after it fell below the daily moving average on Friday. It settled at 14,100/mt with its KDJ indicators expanding downwards and transactions cooling down. We see it testing support at the 14,000 yuan/mt level today. Trading range is set at 14,000-14,150 yuan/mt with spot discounts at 70-40 yuan/mt. As the US dollar strengthened, LME aluminium also traded weakly last Friday night as it registered the third consecutive trading day of decline to settle at $2,006.5/mt with support from the $2,000/mt level. We see it hovering at $1,950-2,020/mt today.

Zinc: LME zinc fluctuated to finish Friday down some 1.6% with its five- and 10-day moving averages and KDJ lines expanding downwards. It is likely to continue its weak performance today with a trading range of $2,610-2,660/mt. The SHFE 1812 contract opened in negative territory on Friday night and initially fell past the five- and 10-day moving averages to a low of 21,695 yuan/mt as shorts aggressively added their positions on gains in social inventories of refined zinc across Shanghai, Tianjin and Guangdong. The contract recovered some losses by closing and is likely to trade at 21,700-22,200 yuan/mt today.

Nickel: With pressure at the 20-day moving average, LME nickel reversed some gains after it hit a high of $12,625/mt on Friday. The SHFE 1901 contract fluctuated and gained some 0.8% on Friday night. Downstream consumers were keen to purchase when prices were at relatively low levels. This, together with short-term shorts covering their positions, provided some support to SHFE nickel. LME nickel is likely to hover around $12,500/mt today with the SHFE 1901 contract at 102,500-104,000 yuan/mt. Spot prices are seen at 102,500-109,500 yuan/mt.

Lead: LME lead clawed back most earlier losses by closing on Friday with support from institutional investors. Earlier in the day, the contract fell to a low of $1,970.5/mt as longs booked profits after it crept to a high of $2,004/mt. The SHFE 1812 contract initially fell to a low of 17,950 yuan/mt on Friday night and recovered some losses by closing. It has closed lower for six consecutive days. Support remained at the 40-day moving average.

Tin: LME tin continued to hover within a narrow range on Friday and is likely to remain rangebound in the short term. The SHFE 1901 contract traded rangebound around the 20-day moving average and closed flat at 146,790 yuan/mt on Friday night. With limited upward momentum, SHFE tin is expected to trade rangebound into near term with support at 146,000 yuan/mt.