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SMM Morning Comments (Jan 25)

iconJan 25, 2019 09:38
Source:SMM
SMM Morning Comments

SHANGHAI, Jan 25 (SMM) –

Copper: A higher US dollar and a buildup of shorts weighed LME copper to a low of $5,897/mt during the European trading session. Global growth concerns depressed market sentiment, and this lowered the SHFE 1903 contract for the fifth consecutive trading day, overnight. The contract lost support from all moving averages, standing at a low at 47,090 yuan/mt. There is a further downward room in the contract as shorts accumulate. The trading range today is set at 47,000-47,400 yuan/mt with LME copper at $5,890-5,940/mt. Spot discounts are seen at 170-100 yuan/mt as falling prices of futures may attract some downstream purchases. 

Aluminium: LME aluminium extended its rangebound trend overnight as it rebounded to close at $1,885/mt after fell below the five-day moving average. The SHFE 1903 contract found support at the five-day moving average, and jumped to a high of 13,565 yuan/mt, pulled by expectations of further capacity cuts and improved consumption. Lower costs will limit its upward momentum. We see the contract trading at 13,450-13,600 yuan/mt with LME aluminium at $1870-1,900/mt today. Spot discounts are set at 70-30 yuan/mt. 

Zinc: LME zinc registered the seventh consecutive trading day of increase to close at $2,626/mt, buoyed by continued concerns about tighter supplies. The SHFE 1903 contract consolidated at highs above the Bollinger upper band, with a high of 21,705 yuan/mt. While tight supplies provided support, fewer pre-CNY purchases grew caution across longs. The contract is expected to trade at 21,400-21,800 yuan/mt with its LME counterpart at $2,590-2,640/mt today. 

Nickel: LME nickel returned above the five-day moving average after a higher US dollar dragged it to a low of $11,590/mt. The 1905 contract led the increases among SHFE base metals, as it gained 0.77% to settle at 94,620 yuan/mt as longs accumulated. We expect it to trade at 93,500-95,500 yuan/mt with LME nickel at $11,650-11,850/mt today. Spot prices are set at 94,000-95,500 yuan/mt. 

Lead: A decline of some 1,000 mt in lead inventories across LME warehouses raised LME lead above the daily moving average, to a high of $2,074.5/mt. It ended at $2,073.5/mt with open interests down 2,384 lots to 98,367 lots. The SHFE 1903 contract moved in line with its LME counterpart and closed higher at 17,765 yuan/mt after it rose to a high of 17,795 yuan/mt. However, a lack of strong support from fundamentals may see it coming off from highs in the short run. 

Tin: Expectations of smaller supplies from Indonesia continued to boost LME tin and the SHFE 1905 contract overnight. LME tin closed $205/mt higher at $20,905/mt while the contract surged above the 148,800 yuan/mt level to a high of 149,180 yuan/mt. Pressure above at $21,000/mt and 150,000 yuan/mt, respectively, will cap their upward room in the short run. 

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