SMM Morning Comments (Dec 4)

SHANGHAI, Dec 4 (SMM) –

Copper: LME copper fell to close at $6,250/mt overnight after it climbed to a high of $6,328.5/mt. Despite an initial increase to a high of 50,370 yuan/mt, the SHFE 1902 contract fell into negative territory to close at 49,910 yuan/mt overnight. Copper prices are expected to stay at highs as a ceasefire in the US-China trade war, the Fed’s dovish tone and expected oil supply cuts prompt investors to shun safe-haven US currency and to turn to riskier assets. LME copper is likely to trade at $6,230-6,280/mt today with the SHFE 1902 contract at 49,800-50,250 yuan/mt. Spot premiums are seen at 100-200 yuan/mt.

Aluminium: The SHFE 1902 contract slid to close at 13,795 yuan/mt overnight as short-term longs took profits after the contract initially climbed. Weak fundamentals keep SHFE aluminium prices in a bearish outlook in the medium term. We expect the contract to trade at 13,700-13,850 yuan/mt today with spot discounts of 90-50 yuan/mt. LME aluminium slipped to close at $1,974/mt overnight, below the 40-day moving average, after it climbed to a high of 1,996/mt in European trades. We expect it to trade at $1,950-1,980/mt today.

Zinc: LME zinc rose to close at $2,575.5/mt overnight, exceeding all moving averages. Falling LME inventories widened the LME zinc's cash/three-month spread to a record high. We expect LME zinc to continue its strong performance today with a trading range of $2,550-2,600/mt. The SHFE 1902 contract recovered earlier losses to close at 20,855 yuan/mt overnight. Despite low inventories, the earlier losses in SHFE zinc reflected limited upward momentum in prices, due to weakening consumption as the year draws to a close. We expect the contract to trade at 20,600-21,100 yuan/mt today.

Nickel: LME nickel fluctuated to close at $11,195/mt overnight. The SHFE 1901 contract regained some losses to end at 91,500 yuan/mt after it fell to a low of 91,080 yuan/mt. Weak domestic fundamentals could provide SHFE nickel with limited upward momentum. We expect LME nickel to hover around $11,200/mt today with the SHFE 1901 contract at 91,000-92,500 yuan/mt. Spot prices are seen at 91,500-100,500 yuan/mt.

Lead: LME lead lost earlier gains to close at $1,961.5/mt overnight, suggesting that the market has priced in the temporary suspension of the US-China trade war. It is unlikely to break the $2,000/mt level in the short term. With a weak LME counterpart, the SHFE 1901 contract initially tumbled to a low of 18,405 yuan/mt overnight. It then hovered in a 100 yuan/mt range around the daily moving average and closed at 18,480 yuan/mt. Investors refocused on fundamentals.

Tin: LME tin extended its rebound and closed at $18,850/mt overnight. This helped it to stand above the 10-day moving average. We expect it to continue to climb in the short run with resistance at $19,000/mt. The SHFE 1901 contract rose overnight, ending at 145,280 yuan/mt. We expect it to remain strong in the near term with resistance at 146,500 yuan/mt.