SMM Morning Comments (Oct 29)

SHANGHAI, Oct 29 (SMM) –

Copper: As the US dollar came off from earlier highs, LME copper rebounded from day-lows of $6,100/mt to close at $6,182/mt on Friday. While the SHFE 1812 contract traded in the red, it climbed to a high of 50,030 yuan/mt on Friday night as longs added their positions. Profit growth at China's industrial firms slowed for the fifth consecutive month in September. Beijing's multi-year crackdown on corporate debt and risky lending practices might account for the slowing growth in China’s manufacturing sector. Open interest for SHFE copper complex shrank below 500,000 lots, reflecting sluggish copper consumption across domestic markets. SMM does not expect copper prices to rebound substantially in the short term. Sellers were keen to lower offers to offload cargoes while downstream consumers stood on sidelines. Consumption is expected to remain poor this week. LME copper is likely to trade at $6,130-6,180/mt today with the SHFE 1812 contract at 49,700-50,100 yuan/mt. Spot discounts are seen at 140-100 yuan/mt.

Aluminium: A potential resumption of Hydro’s alumina refinery and a strengthened US dollar depressed LME aluminium to a low of $1,975/mt. It then rebounded to settle at $2,006/mt. The SHFE 1812 contract rallied from a low of 14,100 yuan/mt as its LME counterpart rebounded. We see it trading at 14,050-14,200 yuan/mt today with LME aluminium at $1,970-2,010/mt. Spot discounts are set at 70-30 yuan/mt today.

Zinc: LME zinc recovered all earlier-session losses on dips in the dollar after refreshing the lowest in the week at $2,610/mt. With pressure at the five-day moving average, the contract edged down after hitting a high of $2,664.5/mt. LME zinc is likely to trade rangebound into the near term and trade at $2,625-2,675/mt today. The SHFE 1812 contract crept to close near session highs on Friday night as longs built their positions. It is expected to trade at 22,100-22,500 yuan/mt today.

Nickel: LME nickel was the biggest loser among base metals on Friday even as it recovered some losses after falling to a low of $18,810/mt. The SHFE 1901 contract opened deep in negative territory on Friday night and initially weakened. It clawed back some losses later in the trading hours. The contract fell past the 100,000 yuan/mt level during Friday’s daytime trading hours in anticipation of nickel pig iron (NPI) supply increases and concerns of weakening consumption. LME nickel is likely to hover around $11,900/mt today with the SHFE 1901 contract at 98,000-99,500 yuan/mt. Spot prices are seen at 99,000-107,500 yuan/mt.

Lead: LME nickel clawed back some earlier losses on Friday after the US dollar index fell from highs. The contract continued to trade rangebound. The SHFE 1812 contract initially rose on Friday night and posted a four-day winning streak, near previous highs.

Tin: LME tin fluctuated to finish Friday down, with resistance at $19,400/mt. It is likely to remain rangebound in the short term with support at $19,000/mt. The SHFE 1901 contract extended its declines to end at 147,180 yuan/mt. It is expected to remain weak into near term with support at 146,000 yuan/mt.