SMM Morning Comments (Jan 18)

SHANGHAI, Jan 18 (SMM) –

Copper: LME copper broke pressure at the 20-day moving average to climb to a high of $5,998.5/mt near closing. It settled at $5,995.5/mt with open interests up 1,461 lots to 282,000 lots. As market sentiment improved on hopes of a second Brexit referendum, we expect LME copper to test resistance at the Bollinger middle band, or the $6,000/mt level today. The SHFE 1903 contract also increased to a high of 47,710 yuan/mt and closed at 47,660 yuan/mt as shorts exited. Today, it is likely to hover at 47,400-47,800 yuan/mt with its LME counterpart at $5,970-6,010/mt. Spot sellers are expected to destock and offer at premiums up to 80 yuan/mt today.  

Aluminium: LME aluminium traded rangebound and rose to hit the 20-day moving average, or $1,856/mt, buoyed by higher prices of crude oil. It settled around the 10-day moving average at $1,852/mt. It is likely to trade at $1,840-1,865/mt today. The SHFE 1902 contract found support at the five-day moving average, and slowed declines to close at 13,375 yuan/mt. We see it trading at 13,350-13,450 yuan/mt today with spot discounts at 70-30 yuan/mt. 

Zinc: Prices of zinc led gains among base metal overnight as rising longs and hopes on eased US-China trade tension buoyed LME zinc to $2,538/mt. It broke previous technical pressure at the 40- and 60-day moving averages, and may trade at $2,500-2,550/mt as LME inventories shrink. The SHFE 1903 contract gained15,884 lots in open interests overnight, and this pulled it to a high of 21,380 yuan/mt. Expectations of improved supply and demand will keep the contract trading at 21,000-21,500 yuan/mt today. 

Nickel: A higher US dollar depressed LME nickel to lows of d $11,500/mt during the European trading session. The prices then received support from a surge in crude oil prices and rose to a high of $11,670/mt. Limited upward momentum ended it at $11,585/mt. The SHFE 1905 contract was pulled by a buildup of longs, to a high of 93,700 yuan/mt. Weak domestic supply and demand are likely to keep it trading at 92,000-94,000 yuan/mt today, with LME nickel at $11,400-11,700/mt. Spot prices are set at 92,500-94,000 yuan/mt. 

Lead: LME lead continued to hover at lows with support at the 10-day moving average. It ended at $1,970.5/mt with the lowest overnight at $1,955/mt. The SHFE 1902 contract fell below the daily moving average to a low of 17,595 yuan/mt. The contract is likely to see some downward room. 

Tin: LME tin consolidated at highs and closed at $20,570/mt after it rose to a high of $20,715/mt. Pressure above is seen at the $20,800/mt level. The SHFE 1905 contract continue to edge down as more longs took profits and exited. It settled at 147,720 yuan/mt and will test support below at 147,000 yuan/mt in the short run.