SHANGHAI, Jan 2 (SMM) –
Copper: LME copper declined to a three-month low of $5,887.5/mt on Monday December 31 as shorts surged. It settled at $5,912/mt with open interest up 2,190 lots to 286,000 lots. An economic slowdown and trade tension with the US lowered China’s manufacturing activity in December, the first since July 2016, and this depressed market sentiment. Without technical support, LME copper is likely to continue its weak trend and trade at $5,930-6,030/mt today after five consecutive trading days of decline. The SHFE 1902 contract will trade at 47,800-48,200 yuan/mt today with spot offers at a premium of 30-100 yuan/mt. Restocking across downstream buyers and traders will improve spot transactions.
Aluminium: Improved cash flow issues at domestic alumina plants will slow the decline in prices of alumina in the short run, and support prices of aluminium. However, a general oversupply of raw materials and slower production cuts of aluminium capacity will cap any increase in prices in the medium run. Today, the SHFE 1902 contract is likely to trade at 13,435-13,565 yuan/mt, with spot discounts at 60-20 yuan/mt. LME aluminium will maintain its weak trend and hover at $1,840-1,875/mt today.
Zinc: LME zinc unsuccessfully tested resistance at the five- and 10-day moving averages last Friday night, and dipped to a low of $2,435/mt. It extended its weak trend on Monday, as shorts weighed it to around $2,450/mt, and ended it at $2,454/mt. Continued pressure from shorts is likely to keep it trading at $2430-2480/mt today. Despite a weak LME counterpart, the SHFE 1902 contract will receive support from current record low inventories, and trade at 20,600-21,000 yuan/mt today. An influx of bonded cargoes is expected to ease supply tightness in domestic markets.
Nickel: Risk sentiment lowered LME nickel to the lowest of 2018, at $10,630/mt on Monday. This was despite a weaker US dollar after the US President Donald Trump said 'big progress' on possible China trade deal. For January, production cuts and maintenance schedule across downstream stainless steel plants in China will provide limited support on prices. We expect LME nickel to weaken further with its SHFE counterpart trading at 87,500-89,000 yuan/mt today. Spot prices are set at 88,000-91,000 yuan/mt today.
Lead: Last Friday night, LME lead jumped to a high in two months, at $2,060/mt, but limited upward momentum settled it at $2,043/mt. Exiting longs lowered it from highs on Monday. With support at the five-day moving average, it ended at $2,010.5/mt. We expect it to trade at $2,000-2,030/mt today, and test support at the $2,000/mt level in the short run.
Tin: LME tin traded rangebound within $19,350-19,500/mt on Monday and ended $30/mt higher on the day at $19,460/mt. A lower US dollar index below 96 pulled up prices. The SHFE 1905 contract fell to a low of 142,500 yuan/mt last Friday. Growing supplies after the New Year’s Day holiday are expected to weigh on the contract today.