SMM Morning Comments (Jan 16)

SHANGHAI, Jan 16 (SMM) –

Copper: Improved risk appetite pushed the US dollar up and lowered prices of LME copper from a high of $5,955/mt. LME copper prices ended at $5,906/mt, with open interests down 977 lots to 286,000 lots as longs exited. The SHFE 1903 contract faced pressure from several moving averages, and closed below the daily moving average, at 47,070 yuan/mt. We expect the contract to trade at 46,800-47,150 yuan/mt today with its LME counterpart at $5,890-5,930/mt. Quiet trades are likely to keep spot premiums  at 60-110 yuan/mt. 

Aluminium: LME aluminium found technical support overnight after five consecutive trading days of decline. It closed some 1% higher at $1,851/mt with the highest level overnight at $1,862/mt. It is likely to trade at $1,845-1,870/mt today. The SHFE 1902 contract rebounded to a high of 13,365 yuan/mt as longs entered. We expect it to return to around 13,500 yuan/mt in the short run. Today, it will trade within 13,340-13,450 yuan/mt with spot discounts at 60-20 yuan/mt. 

Zinc: LME zinc traded weakly and fell below support at the 10-day moving average with limited upward momentum, on expectations of a potential accumulation in LME zinc inventories. The SHFE 1903 contract received pressure from the 40-day moving average, and closed at 20,455 yuan/mt. Shorts grew open interests by 3,574 lots to 205,000 lots. It is likely to continue the weak pattern and trade at 20,250-20,650 yuan/mt, with its LME counterpart at $2,440-2,490/mt today. 

Nickel: As all SHFE base metals ended higher overnight, the SHFE nickel 1905 contract led gains and jumped 1.29%, to close at 92,910 yuan/mt. LME nickel also settled over 1% higher at $11,605/mt, after it rose to a high of $11,685/mt. A buildup of longs lifted prices. We expect LME nickel to hover around $11,500/mt today with the 1905 contract trading at 92,000-93,500 yuan/mt. Spot prices are expected at 92,000-93,500 yuan/mt. 

Lead: A higher US dollar dragged LME lead to a low of $1,960/mt and ended it at that level overnight. The SHFE 1902 contract consolidated at lows and settled at 17,520 yuan/mt. Slow consumption ahead of CNY will keep the contract trading rangebound. 

Tin: Regulatory changes around Indonesian tin exports intensified tight global supplies of tin, which buoyed LME tin to a high of $20,680/mt and settled it at $20,675/mt. It will test pressure at $21,000/mt in the short run. Downstream purchases ahead of CNY provided some support to the SHFE 1905 contract overnight. Pressure above is set at 150,000 yuan/mt.