SMM Morning Comments (Nov 6)

SHANGHAI, Nov 6 (SMM) – 

Copper: LME copper extended its decline overnight as cautious investors eyed the upcoming US mid-term election and the resumption of Washington's sanctions on Iran. Accumulated shorts dragged it to a low of $6,171/mt, while support was seen at the Bollinger middle band. The SHFE 1901 contract failed to test pressure above at 49,730 yuan/mt several times and settled at 49,650 yuan/mt, with support at the 10-day moving average. The trading range today is set at 49,200-49,700 yuan/mt for the 1901 contract and at $6,180-6,250/mt for LME copper. Spot offers will stay flat to a premium of 40 yuan/mt as traders firm up premiums on falling prices of futures. 

Aluminium: The SHFE 1901 contract slumped to the lowest level since the end of January 2017, at 13,780 yuan/mt as shorts increased some 4,000 lots within five minutes near closing. It closed at 13,945 yuan/mt after testing twice the resistance at that level. We expect it to extend the weak trend today and trade at 13,830-13,950 yuan/mt, with spot discounts at 70-30 yuan/mt. LME aluminium lost upward momentum after rose to a high of $1,991/mt. It settled at $1,974.5/mt with little upward room expected today. Trading range is likely at $1,960-1,990/mt today. 

Zinc: Cautious sentiment in the market kept LME zinc around $2,530/mt with the lowest overnight at $2,497.5/mt. It is likely to trade at $2,500-2,550/mt today with limited downward room. The SHFE 1901 contract received support at the Bollinger lower band and the 60-day moving average as social inventories shrink. Upward momentum from technical factors will be limited, and this may see the contract trading at 20,820-21,300 yuan/mt today. 

Nickel: Concerns about the upcoming mid-term elections lowered LME nickel below the daily moving average overnight. As support from eased trade tension faded, the SHFE 1901 contract came off from a high of 97,700 yuan/mt and settled at 97,450 yuan/mt. We expect the contract to trade at 96,500-98,000 yuan/mt with its LME counterpart at $11,800/mt today. Spot prices are set at 98,000-107,000 yuan/mt today. 

Lead: As base metals declined across the board during the European trading session overnight, LME lead slumped below the five-, 10-, and 20-day moving averages to a low of $1,929.5/mt. It faced pressure at all moving averages and closed at $1,935 yuan/mt. The SHFE 1812 contract registered a smaller drop, benefited from current low-level inventories at SHFE warehouses and technical support. It rebounded from a low of 18,565 yuan/mt to close at 18,595 yuan/mt. The contract is expected to trade at 18,500-18,650 yuan/mt today with spot prices at 18,800-18,950 yuan/mt. 

Tin: Both LME tin and the SHFE 1901 contract faced pressure from shorts, and closed lower overnight. Their weak trends are likely to continue today with LME tin testing support at $19,000/mt and its SHFE counterpart testing 143,500 yuan/mt.