SMM Morning Comments (Jan 8)

SHANGHAI, Jan 8 (SMM) –

Copper: A lower US dollar provided support to LME copper at the five-day moving average overnight. It rebounded to a high of $5,940.5/mt and closed at $5,914/mt, with open interests up 1,807 lots to 284,000 lots. The SHFE 1903 contract unsuccessfully tested resistance at the 47,490 yuan/mt level, and traded rangebound near closing to settle at 47,330 yuan/mt. Trading range today is set at 47,200-47,700 yuan/mt with LME copper at $5,900-5,950/mt. A closed import arbitrage window affected supplies in the domestic spot market, and will keep spot premiums at highs of 70-170 yuan/mt today. 

Aluminium: Limited upward momentum ended LME aluminium at $1,878/mt, after it rallied to a high of $1,885/mt and consolidated above the daily moving average. It is likely to trade at $1,855-1,888/mt today, with the SHFE 1903 contract at 13,380-13,480 yuan/mt. The contract faced resistance at the five-day moving average, and closed at 13,465 yuan/mt after it jumped to a high of 13490 yuan/mt overnight. Spot discounts are set at 50-10 yuan/mt. 

Zinc: Optimism around US-China trade pulled LME zinc close to the $2,500/mt level, and ended it at $2,496/mt, the third consecutive trading day of increase. Zinc inventories across LME warehouses shrank overnight, and this is expected to support prices at $2,470-2,520/mt today. The SHFE 1903 contract received support from a stronger LME zinc, and rose to a high of 20,435 yuan/mt. It registered smaller gains compared to its LME counterpart. Current weak supplies and demand in the domestic market are likely to keep the contract trading at 20,150-20,550 yuan/mt today.

Nickel: A weaker US dollar lifted LME nickel after it fell below support at $1,100/mt and dipped to a low of $11,080/mt. With pressure at $11,200/mt, it closed at $11,150/mt with LME nickel inventories down 900 mt to 204,852 mt. The SHFE 1905 contract also rebounded from a low of 90,460 yuan/mt. It found support at the 40-day moving average and tested pressure at 91,000 yuan/mt. We expect it to trade at 90,000-92,000 yuan/mt today, with its LME counterpart at $11,000-11,200/mt. Spot prices are seen at 90,500-91,500 yuan/mt. 

Lead: A weaker US dollar buoyed LME lead to a high of $2,010/mt. Significant pressure at the $2,000/mt level settled it at $1961.5/mt, with open interests down 2,693 lots. It lacks adequate upward momentum to break resistance at $2,000/mt in the short run. Quiet trades lowered the SHFE 1902 contract to a low of 17,505 yuan/mt. Smaller inflows of capitals ahead of CNY are likely to lower prices. 

Tin: LME tin broke pressure at $19,700/mt and climbed to $19,790/mt, the highest since August. Expectations of a lower US dollar will keep prices trading robustly in the short run, which will test resistance at $20,000/mt today. The SHFE 1905 contract rallied above the 20-day moving average, and closed at 145,280 yuan/mt. We expect it to test pressure at 145,500 yuan/mt today.