SMM Morning Comments (Feb 20)

SHANGHAI, Feb 20 (SMM) –

Copper: LME copper hit an 11-week high in US trading hours after the US dollar fell against a basket of other currencies. The contract ended higher, at $6,332/mt. The SHFE 1904 contract also rose to a multi-week high of 49,790 yuan/mt overnight as longs aggressively added their positions. It closed at 49,770 yuan/mt. US-China trade optimism and a weaker dollar buoyed copper prices. Low copper inventories across the SHFE, LME and COMEX also provided support. LME and SHFE copper are expected to see further upside room today with most transactions occurring at $6,285-6,350/mt for LME copper and at 49,500-50,000 yuan/mt for the SHFE 1904 contract. Spot discounts are seen at 200-70 yuan/mt. Sharp gains in prices of futures are likely to limit spot deals.

Aluminium: LME aluminium fluctuated on Tuesday, ending marginally higher at $1,857/mt. It is expected to trade at $1,840-1,870/mt today. With limited upward momentum, the SHFE 1904 contract traded rangebound overnight after a higher open. The contract closed at 13,485 yuan/mt and is likely to trade at 13,400-13,500 yuan/mt today. Spot discounts are seen at 50-10 yuan/mt against the SHFE March contract.

Zinc: LME zinc rose to end Tuesday at $2,664/mt as LME zinc inventories fell below 90,000 mt, which further raised concerns about supplies. A sharp decline in the greenback also helped lift LME zinc. Shrinking inventories strengthened the backwardation structure on the LME. This, together with positive macroeconomic developments, is expected to keep LME zinc robust today, with a trading range of $2,630-2,675/mt. The SHFE 1904 contract continued its daytime rangebound pattern in early trade overnight. The contract later climbed to close at 21,540 yuan/mt, following the strong performance of its LME counterpart. Three sessions of gains lifted the contract above the 10-day moving average. Inventory pressure and an anticipated pick-up in consumption are expected to keep the contract in the current range. The SHFE 1904 contract is expected to trade at 21,300-21,700 yuan/mt today.

Nickel: LME nickel advanced to end at $12,665/mt on Tuesday. Gains in LME nickel bolstered the SHFE 1905 contract to a high of 100,350 yuan/mt overnight before the SHFE contract ended at 100,220 yuan/mt. Nickel prices are expected to extend their gains today. LME nickel would likely trade at $12,550-12,700/mt today with the SHFE 1905 contract at 99,000-100,500 yuan/mt. Spot prices are seen at 99,000-100,500 yuan/mt.

Lead: A substantial gain in LME lead inventories lowered the three-month lead contract on the LME from a high of $2,041/mt on Tuesday, before a weaker US dollar lifted the contract to end the trading day at $2,021/mt. Two consecutive days of losses returned the contract to the $2,000/mt level. The SHFE 1903 contract opened lower overnight on declines in its LME counterpart. It later pared some losses to end at 16,830 yuan/mt as LME lead rebounded. Traders continued to stand on the sidelines and this affected trades. 

Tin: LME tin dipped to close at $21,145 on Tuesday. It is likely to hold steady in the short run as LME tin inventories stay at lows. The SHFE 1905 contract traded rangebound below the daily moving average for much of overnight, ending at 150,480 yuan/mt. It is expected to try to hang on above the 150,000 yuan/mt level.