SMM Morning Comments (Oct 26)

SHANGHAI, Oct 26 (SMM) –

Copper: On Thursday, LME copper rebounded to $6,200/mt from a two-week low of $6,113.5/mt after data showed that LME inventory decreased to a 12-year low. A robust dollar then forced it to give up some gains before the contract refreshed day-highs of $6,227.5/mt on short-covering. As shorts took profits, the SHFE 1812 contract crept to session-highs of 50,390 yuan/mt before it edged down by closing. In the physical market, spot discounts are likely to widen after long-term contracts were completed and as copper prices rose. Downstream consumers stood on sidelines. LME copper is likely to trade at $6,150-6,220/mt today with the SHFE 1812 contract at 49,900-50,400 yuan/mt. Spot discounts are seen at 80-30 yuan/mt.

Aluminium: The SHFE 1812 contract reversed its earlier gains and stemmed its five-day winning streak overnight. It initially jumped to session-highs of 14,310 yuan/mt as longs aggressively added their positions with open interest up over 2,600 lots in 10 minutes. With a strong dollar and a weak LME counterpart, the SHFE 1812 contract is likely to trade at 14,170-14,300 yuan/mt today with spot discounts at 70-30 yuan/mt. LME aluminium fell past $2,000/mt and closed near its day lows overnight. It has closed lower for seven consecutive trading days and is likely to continue its weak performance today with a trading range of $1,980-2,020/mt.

Zinc: LME zinc recovered most earlier losses that it relinquished following gains in the US dollar index overnight. It is likely to remain rangebound in the short term with a trading range of $2,625-2,670/mt today. As shorts covered their positions, the SHFE 1812 contract clawed back all earlier losses overnight even as it closed in the negative territory. It is expected to trade at 22,000-22,400 yuan/mt today.

Nickel: LME nickel came off from day-highs of $12,335/mt and closed at $12,185/mt overnight. The SHFE 1901 contract fell from the 102,000 yuan/mt level to end in the red overnight. Anticipation of nickel pig iron (NPI) supply increases and downstream consumption cuts and fears of a slowdown in global economic growth accounted for the recent declines in nickel prices. But low inventories provided some support at the 100,000 yuan/mt level. LME nickel is expected to hover around $12,150/mt today with the SHFE 1901 contract at 100,500-102,000 yuan/mt. Spot prices are seen at 101,000-108,500 yuan/mt.

Lead: As the dollar strengthened, LME lead reversed its earlier gains that were boosted by its strong SHFE counterpart. It is currently trading rangebound with thin trading liquidity. The SHFE 1812 contract fell by closing overnight as short-term longs booked profits after the contract climbed to a high of 18,485 yuan/mt.

Tin: LME tin mostly hovered between $19,270-19,350/mt with the lowest overnight at $19,140/mt as the US dollar index grew. Support below is expected at $19,000/mt in the short run. The SHFE 1901 contract received limited support from fundamentals and settled at 147,870 yuan/mt after it dipped to a low of 147,590 yuan/mt. We see it facing resistance at 149,000 yuan/mt with support at 146,000 yuan/mt.