SMM Morning Comments (Dec 12)

SHANGHAI, Dec 12 (SMM) –

Copper: Short-covering pushed LME copper to the day’s highs of $6,194.5/mt on Tuesday. The contract relinquished some gains to close at $6,146/mt as the US dollar gained. The SHFE 1902 contract climbed to a high of 49,370 yuan/mt overnight after a higher open. It came off to close at 49,240 yuan/mt. We expect upward momentum in copper prices to wane today. LME copper is expected to trade at $6,120-6,170/mt with the SHFE 1902 contract at 49,000-49,400 yuan/mt. Spot premiums are seen at 80-220 yuan/mt.

Aluminium: The SHFE 1901 contract fell into the red, to a low of 13,595 yuan/mt, as longs took profits after the contract hit a high of 13,690 yuan/mt. It closed at 13,605 yuan/mt overnight. Declines in aluminium prices slowed as supply cuts and downstream purchases would support prices into the short term, but cost support is set to wane in the medium term. SHFE aluminium is expected to trade at 13,550-13,700 yuan/mt today with spot prices at discounts of 20 yuan/mt to premiums of 20 yuan/mt. As the US dollar rose, LME aluminium came off from the day’s highs of $1,965/mt to close at $1,936/mt on Tuesday. With the dollar’s strength, LME aluminium is likely to remain weak with most transactions at $1,930-1,960/mt today.

Zinc: LME zinc jumped to a high of $2,622.5/mt on Tuesday before it pulled back to close at $2,597/mt. The five-day moving average and the $2,600/mt level proved to be significant resistance. A decline in LME stocks also provided some support to prices overnight. We expect LME zinc to trade at $2,565-2,610/mt today. The SHFE 1902 contract opened higher and climbed to a high of 21,320 yuan/mt in earlier trades overnight. It then lost some of those gains to end at 21,080 yuan/mt as shorts added and longs cut their bets. With limited stream and strong resistance at several moving averages, the contract is expected to hover among moving averages today with a trading range of 20,750-21,200 yuan/mt.

Nickel: As the US dollar surged, LME nickel tumbled to close lower at $10,745/mt overnight, down from the day’s highs of $10,945/mt. The rebound in the dollar also weighed the SHFE 1905 contract overnight. The contract came off from a high of 89,940 yuan/mt to fall into the red, ending at 88,830 yuan/mt. LME nickel is expected to hover around $10,800/mt today with the SHFE 1905 contract at 88,500-90,000 yuan/mt. Spot prices are seen at 89,000-96,500 yuan/mt.

Lead: LME lead crept up to close at $1,977.5/mt on Tuesday. This helped it recover most losses made in the previous day. The SHFE 1901 contract initially surged to a high of 18,515 yuan/mt overnight. With limited upward momentum, the contract then fell to the 10-day moving average and closed at 18,460 yuan/mt. It is unlikely to move out of its current range in the short term and is expected to continue to hover around the 10-day moving average today.

Tin: LME tin rose to close at $19,070/mt on Tuesday. It has yet to shrug off resistance at all moving averages and remains in a sideways range with resistance at $19,100/mt. The SHFE 1905 contract inched up in the range between the five- and 10-day moving averages and closed at 146,310 yuan/mt overnight. It is expected to remain rangebound in the near term with resistance at 147,000 yuan/mt.