SMM Morning Comments (Feb 18)

SHANGHAI, Feb 18 (SMM) –

Copper: A decline in the US dollar and an increase in crude prices amid US-China trade optimism bolstered copper prices on Friday. LME copper gained 1.4% to end at $6,224/mt on Friday. The SHFE 1904 contract advanced 0.6% to close at 48,640 yuan/mt on Friday night, and it now stands above all short-term moving averages. With inventory pressure, copper prices are likely to stage a downward correction after the sentiment, bolstered by positive macroeconomic developments, fades. LME copper is expected to trade at $6,170-6,230/mt today with the SHFE 1904 contract at 48,200-48,750 yuan/mt. Spot discounts are seen at 140-40 yuan/mt.

Aluminium: LME aluminium gained 0.3% on Friday and closed at $1,855.5/mt. It is expected to trade at $1,850-1,870/mt. The SHFE 1903 contract opened slightly higher on Friday night and shrugged off resistance at the 60-day moving average in later trade. It closed at 13,470 yuan/mt. The SHFE 1903 contract is likely to trade at 13,300-13,600 yuan/mt today. Spot discounts are seen at 120-80 yuan/mt against the 1903 contract.

Zinc: LME zinc rose on Friday following the news that a fire broke out at Korea Zinc's Onsan smelter, which would escalated fears of tighter zinc supplies in the short run. Supported by US-China trade optimism and China’s upbeat January loan data, LME zinc finished Friday 2.9% higher at $2,664/mt. This helped the contract pare most losses made earlier in the week. It is expected to stay highs today with most transactions occurring at $2,625-2,680/mt. After a higher open, the SHFE 1904 contract climbed to close at 21,625 yuan/mt on Friday night. Recovering consumption in China, the impact from the fire incident at the South Korean zinc smelter and rising hopes of a US-China trade deal are expected to ease bearish sentiment this week, while growing inventories in China would weigh on zinc prices. The SHFE 1904 contract is expected to consolidate at 21,350-21,800 yuan/mt today.

Nickel: LME nickel broke through the $12,400 yuan/mt level in late trade on Friday, and ended at $12,415/mt. After hovering around the daily moving average, the SHFE 1905 contract rose past the 10- and five-day moving averages to close at 98,800 yuan/mt on Friday night. LME nickel is expected to trade rangebound around $12,350/mt today and the SHFE 1905 contract is likely to trade at 98,000-99,500 yuan/mt. Prices of spot nickel plates are seen at 98,500-100,000 yuan/mt.

Lead: LME copper went up close to 2% to end Friday at $2,077/mt, which would improve risk appetite among investors. Gains in its LME counterpart drove the SHFE 1903 contract to post a higher open on Friday night, which later extended its gains to end at 17,080 yuan/mt. The unwinding of short positions primarily contributed to the gains in SHFE lead. A lack of signs of long position buildup is likely to limit upside room for the contract.

Tin: LME tin climbed above the five- and 10-day moving averages to close at $21,105/mt on Friday. Low LME tin inventories supported LME tin, which is expected to hold stable at $21,000/mt in the near term. With gains in its LME counterpart, the SHFE 1905 contract rose to end at 149,390 yuan/mt on Friday night. It is expected to try to break through 150,000 yuan/mt in the short run.