SMM Morning Comments (Jan 7)

SHANGHAI, Jan 7 (SMM) – 

Copper: China's reserve requirement ratio (RRR) cuts and renewed hopes for a US-China trade deal buoyed base metals for the most part last Friday. Longs pulled LME copper to a high of $5,940/mt and ended it 2.79% higher at $5,936/mt. The SHFE 1903 contract climbed from a low of 46,810 yuan/mt after opening, and settled at highs of 47,580 yuan/mt, with open interests down 5,918 lots. Technical support may keep the contract trading at 47,500-48,000 yuan/mt with LME copper at $5,900-5,970/mt today. Restocking across buyers are expected to continue today, with spot premiums of 70-200 yuan/mt. 

Aluminium: LME aluminium surged to a high of $1,881/mt and tested resistance at the 10-day moving average following China’s RRRs cuts. The SHFE 1903 contract rallied above the five-day moving average and closed at 13,520 yuan/mt, with open interests up 6,708 lots. We expect it to trade at 13,400-13,550 yuan/mt, with its LME counterpart hovering around the 10-day moving average and trading at $1,855-1,885/mt. SMM will release data on primary aluminium inventories today. 

Zinc: LME zinc increased above the five-day moving average after it tested pressure at $2,450/mt. The SHFE 1903 contract consolidated around 20,150 yuan/mt and settled at 20,200 yuan/mt as longs entered the market near closing. With continued weak consumption and macroeconomic optimism, the contract is expected to trade at 20,000-204,000 yuan/mt today, with LME zinc at $2,415-2,465/mt. 

Nickel: LME nickel rebounded from lows on a weaker US dollar. The SHFE 1905 contract jumped to a high of 90,990 yuan/mt, with support at 89,000 yuan/mt. Open interests accumulated 12,000 lots as longs entered. Today, we expect LME nickel to extend its robust performance and consolidate around $11,000/mt, with the SHFE 1905 contract trading at 90,000-91,500 yuan/mt. Spot prices are set at 90,000-91,500 yuan/mt.  

Lead: LME lead received support at $1,933/mt after it came off from a high of $1,969/mt. However, the SHFE 1902 contract extended declines despite some support from its LME counterpart. The contract dipped to a low of 17,585 yuan/mt and closed at 17,695 yuan/mt, with open interests up 2,162 lots to 59,452 lots. Prices are expected to keep rangebound ahead of CNY. 

Tin: LME tin rose above the five-day moving average and settled at $19,590/mt last Friday night as the US dollar dipped. Pressure above is set at $19,700/mt in the short run. A higher LME tin and departing shorts supported the SHFE 1905 contract above the 10-day moving average, and closed at 145,070 yuan/mt. It is likely to test resistance above at 145,700 yuan/mt today.