SMM Morning Comments (Jan 21)

SHANGHAI, Jan 21 (SMM) –

Copper: US-China trade optimism buoyed market sentiment, and pulled LME copper above the Bollinger middle band, to test pressure at the 40-day moving average. The SHFE 1903 contract registered the fifth consecutive trading day of increase as it settled above the daily moving average at 48,150 yuan/mt, after it jumped to a high of 48,300 yuan/mt near closing. The contract is likely to see further upward room is expected in the contract. Trading range is set at 47,900-48,500 yuan/mt, and at $6,040-6,100/mt for LME copper. Higher prices of futures and an inclination to destock across sellers are likely to lower spot discounts to a low of 40 yuan/mt.   

Aluminium: Stronger than expected US industrial output data boosted LME aluminium, which settled at $1,870/mt after increased to a high of $1,879.5/mt. Open interests grew 1,898 lots to 666,000 lots. Longs raised the SHFE 1902 contract from the daily moving average, to a high of 13,610 yuan/mt. Resistance at the 40-day moving average ended it at 13,575 yuan/mt. Improved market sentiment is likely to see it at highs of 13,500-13,700 yuan/mt, with its LME counterpart at $1,855-1,885/mt. Spot discounts are seen at 70-30 yuan/mt. 

Zinc: LME zinc rallied above all moving averages, to a high of $2,596/mt last Friday night, buoyed by a surge in prices of crude oil. Pressure from the Bollinger upper band and the $2,600/mt level are likely to keep it trading at $2,550-2,600/mt today. The SHFE 1903 contract also broke all technical pressure and rose to a high of 21,745 yuan/mt as investors added their longs. Some longs took profits and left, ending the contract at 21,575 yuan/mt. Today, it is expected to trade at 21,350-21,850 yuan/mt. 

Nickel: Prices of nickel led the increase among base metals last Friday night, with both LME nickel and the SHFE 1905 contract closing nearly 2% higher. LME nickel shrugged off resistance at the $11,800/mt level to a high of $11,855/mt. Inventories across LME warehouses shrank 156 mt to 201,228 mt. A buildup of longs buoyed the SHFE 1905 contract to a high of 95,660 yuan/mt. The contract is likely to trade at 94,000-96,000 yuan/mt today, and at $11,700-11,900/mt for LME nickel. Spot prices are expected at 93,500-95,000 yuan/mt. 

Lead: The US dollar rebounded and LME lead surged to a high of $2,007.5/mt as LME lead inventories fell below 100,000 mt. The SHFE 1902 contract registered the seventh consecutive trading day of increase as it settled at 17,730 yuan/mt, with open interests down 484 lots to 42498 lots. We expect it to come off from highs and to follow a rangebound trend in the short run. 

Tin: LME tin consolidated at highs last Friday night and closed at $20,615/mt after it rose to a high of $20,750/mt. The SHFE 1905 contract traded within the five- and 60-day moving averages. Exiting longs ahead of CNY ended it lower at 147,900 yuan/mt. Support below is set at 147,500 yuan/mt.