SMM Morning Comments (Feb 1)

SHANGHAI, Feb 1 (SMM) –

Copper: The Fed’s dovish tone and market optimism about US-China trade talks buoyed copper prices overnight. LME copper climbed to a high of $6,199/mt on Thursday before it came off to close at $6,163.5/mt. After a higher open, the SHFE 1903 contract traded rangebound to close at 48,220 yuan/mt overnight. After it shrugged off resistance at several technical levels, LME copper outperformed its SHFE counterpart. Today, the SHFE 1903 contract faces pressure at the 60-day moving average and the upper Bollinger band. LME copper is expected to trade at $6,150-6,210/mt today while the SHFE 1903 contract is unlikely to break through the 60-day moving average with most transactions at 48,100-48,370 yuan/mt. Spot discounts are seen at 130-30 yuan/mt.

Aluminium: LME aluminium jumped past the 60-day moving average to a day-high of $1,924/mt on Thursday before it lost most of those gains to end below the 60-day moving average at $1,906.5/mt. It is expected to trade rangebound at $1,890-1,920/mt today and is likely to see relatively weak performance during the Chinese New Year break, without the support from its SHFE counterpart. As longs added their positions, the SHFE 1903 contract climbed a high of 13,565 yuan/mt overnight. It later lost some of those gains to close at 13,525 yuan/mt as longs covered and shorts added their positions. The SHFE 1903 contract is expected to hover at 13,450-13,560 yuan/mt today with spot discounts at 90-50 yuan/mt.

Zinc: LME zinc rallied from earlier lows on Thursday, ending higher at $2,723.5/mt. With currently upbeat fundamentals, LME zinc saw the biggest gains among nonferrous metals on Thursday. Risk appetite across investors is likely to wane with the US-China trade negotiations and US nonfarm payrolls in the spotlight. LME zinc is expected to trade at $2,695-2,745/mt today. The SHFE 1903 contract extended its gains to close at 22,375 yuan/mt overnight and is expected to temporarily stop the uptrend today with a trading range of 22,000-22,500 yuan/mt as investors are likely to cut their positions in the last trading day before the week-long CNY break.  

Nickel: LME nickel extended its gains to a nearly 3-1/2-month high at $12,515/mt on Thursday before it pared some gains to close at $12,475/mt. The SHFE 1905 contract rose to a three-month high at 98,900 yuan/mt overnight before it ended at 98,730 yuan/mt. LME nickel is expected to trade rangebound at $12,400-12,600/mt today with the SHFE 1905 contract at 97,500-99,000 yuan/mt. Spot prices are seen at 97,500-99,000 yuan/mt.

Lead: Continued declines in LME lead inventories bolstered LME lead to rise for a second straight day on Thursday and stand firm above the $2,080/mt level. LME lead gained 1.2% to close at $2,110.5/mt on Thursday. The unwinding of short positions accounted for the gains in last two days, which grows the potential for an imminent pause of this round of gains. Supported by a strong LME counterpart, the SHFE 1903 contract recovered from a lower open to close flat at 17,495 yuan/mt overnight. Trading volumes further thinned with the CNY around the corner.

Tin: LME tin inched up to end at $20,850/mt on Thursday and is expected to remain rangebound at highs in the near term with resistance at $21,000/mt and support at $20,400/mt. The SHFE 1905 contract opened higher and traded rangebound overnight, ending at 148,750 yuan/mt. Investors traded cautiously ahead of the CNY holiday. Support is seen at 147,000 yuan/mt while resistance is at 150,000 yuan/mt.