SMM Morning Comments (Jan 23)

SHANGHAI, Jan 23 (SMM) –

Copper: LME copper fell below the Bollinger middle band to a low of $5,921.5/mt, pressured by a slump in the US pending home sales and market concerns over the global economy. Accumulated LME copper inventories also depressed prices. LME copper settled at $5,932.5/mt with open interests up 470 lots to 281,000 lots. The SHFE 1903 contract faced pressure form shorts, and dipped to a low of 47,320 yuan/mt near closing. An increase of 6,980 lots in open interests ended it at 47,380 yuan/mt. Today, the contract will trade at 47,100-47,600 yuan/mt with its LME counterpart at $5,900-5,960/mt. Spot discounts are expected at 100-40 yuan/mt as downstream purchases improve on lower prices of futures. 

Aluminium: LME aluminium fell below support at the five-, 20-, and 10-day moving averages during the Asian trading session as US-CHINA trade talk optimism waned. It rebounded to a month-high of $1,896.5/mt during the European trading session and closed at $1,893/mt. The rebound buoyed the SHFE 1902 contract to open at a high of 13,455 yuan/mt. As longs took profits and left, the contract dipped to the 10-day moving average and settled at 13,475 yuan/mt. It is expected to trade at 13,420-13,520 yuan/mt with LME aluminium at $1,860-1,895 yuan/mt. Spot discounts are set at 70-30 yuan/mt. 

Zinc: While low inventories of LME zinc underpinned prices, resistance at the Bollinger upper band and the $2,600/mt level limited any upward room in LME zinc. It closed at $2,580/mt with a high overnight at $2,606/mt. The SHFE 1903 contract came off after it tested pressure at the 21,550 yuan/mt level. Slower downstream demand before CNY capped its increase. It is likely to trade more weakly than its LME counterpart, at 21,150-21,650 yuan/mt, with LME zinc trading at $2,560-2,610/mt today. 

Nickel: Lower prices of crude oil dragged LME nickel below the $11,600/mt level, and settled it at $11,595/mt. LME nickel inventories accumulated 2,202 mt to 202,668 mt overnight. The SHFE 1905 contract led the losses among SHFE base metals, as it declined in line with its LME counterpart and closed over 1% lower at 93,570 yuan/mt. Its trading range today is expected at 93,000-94,500 yuan/mt with LME nickel at $11,500-11,750/mt. Spot prices are seen at 93,500-94,800 yuan/mt. 

Lead: While most base metals declined overnight, LME lead extended its robust trend and registered the third consecutive trading day of increase, settling at $2,010.5/mt. The SHFE 1903 contract stopped its decline and consolidated around the daily moving average. It is expected to maintain its rangebound trend ahead of CNY. 

Tin: A buildup of shorts weighed LME tin to a low of $20,365/mt during the European trading session, and ended it at $20,455/mt. It will continue to test support at the $20,400/mt level today. A weaker LME tin and slow domestic consumption lowered the SHFE 1905 contract. It is expected to continue the weak trend today with resistance at 149,000 yuan/mt and support at 146,000 yuan/mt.