SMM Morning Comments (Dec 5)

SHANGHAI, Dec 5 (SMM) –

Copper: LME copper fell to close at $6,168.5/mt overnight as shorts built their bets on the recovery of the US dollar. The SHFE 1902 contract slid to close at 49,230 yuan/mt after a lower open overnight. Copper prices are likely to remain rangebound at lows today with a trading range of $6,150-6,200/mt for LME copper and of 49,200-49,700 yuan/mt for the SHFE 1902 contract. Spot premiums are seen at 110-260 yuan/mt.

Aluminium: The SHFE 1901 contract overnight slid through the 20-day moving average to a low of 13,740 yuan/mt, near the 10-day moving average, as shorts aggressively added their positions after the contract jumped to a high of 13,835 yuan/mt shortly after the opening bell. The contract regained some losses in later trades and closed at 13,770 yuan/mt. We expect it to trade at 13,700-13,800 yuan/mt today with spot discounts at 70-30 yuan/mt. A rebound in the US dollar index forced LME aluminium to reverse its gains made in European trades, to a low of $1,963/mt. LME aluminium ended at $1,970/mt overnight, below the 40-day moving average. We expect it to trade at $1,960-1,980/mt today.

Zinc: As the US dollar rebounded, LME zinc came off from a high of $2,610/mt and closed at $2,583.5/mt overnight. Low LME inventories and wide LME zinc cash/three-month price backwardation helped limit the losses in LME zinc. We expect LME zinc to climb today with most transactions at $2,550-2,600/mt. Despite a higher open, the SHFE 1902 contract fell into the red and closed at 20,785 yuan/mt. While current low inventories limit downside room for the contract, weaker consumption and an expected rise in long-term inventories will limit any upside room. We expect SHFE zinc to remain rangebound and test support at the 20-day moving average today with a trading range of 20,600-21,000 yuan/mt.

Nickel: LME nickel relinquished earlier gains and closed at $11,130/mt overnight as the US dollar climbed. The SHFE 1901 contract tumbled and closed at 90,740 yuan/mt overnight as gains in the dollar encouraged shorts to add bets and forced longs to cut bets. LME nickel is expected to weaken to hover around $11,100/mt today and the SHFE 1901 contract is expected to trade at 90,500-92,000 yuan/mt. Spot prices are seen at 90,500-99,500 yuan/mt.

Lead: LME lead ended at $1,993/mt overnight as some longs took profits after the contract jumped past all moving averages to a high of $2,009.5/mt. It is expected to test pressure at the $2,000/mt level in the short term. Bolstered by its LME counterpart, the SHFE 1901 contract started overnight trading with a higher open and climbed in later trades, settling at 18,590 yuan/mt. The contract moved along the five-day moving average with a looming short-term uptrend.

Tin: LME tin stood above all moving averages and closed at $19,170/mt overnight, with an intraday high of $19,225/mt. We expect it to extend its gains in the near term with resistance at $19,400/mt. The SHFE 1901 contract inched up overnight, ending at 145,800 yuan/mt. With continued tight ore supplies, output cuts across major tin producers in Yunnan and Jiangxi improve the tin fundamentals, fuelling the rally in prices after previous significant sell-offs.