SMM Morning Comments (Feb 22)

SHANGHAI, Feb 22 (SMM) –

Copper: As US crude oil prices pulled back, the three-month LME copper fell to close at $6,374/mt on Thursday. The liquidation of long positions primarily accounted for the losses in LME copper. The SHFE 1904 contract recovered from earlier losses to close barely changed at 49,780 yuan/mt. Optimism about US-China trade talks is expected to provide support to copper prices today. LME copper is likely to trade at $6,350-6,410/mt with its SHFE counterpart at 49,500-50,000 yuan/mt. Spot discounts are likely to narrow today as the imminent delivery of long-term contracts and declines in prices of futures would prompt traders to make purchases after they took a wait-and see stance earlier in the week due to high prices. Spot discounts are seen at 200-50 yuan/mt.

Aluminium: The three-month LME aluminium saw gains accelerate and trading volumes expand in the afternoon of European trade as the fresh round of US-China trade negotiations in Washington began. LME aluminium ended the trading day at $1,907.5/mt and is expected to trade at $1,870-1,910/mt today. The SHFE 1904 contract rose to end at 13,660 yuan/mt overnight, spurred by the news of the shutdown of 110,000 mt of aluminium capacity in a capacity swap. SHFE aluminium is expected to trade at 13,600-13,700 yuan/mt today with spot discounts at 80-40 yuan/mt.

Zinc: As the impact of positive macro developments faded, the three-month LME zinc weakened on Thursday, ending at $2,676/mt. While LME zinc inventories extended their declines towards record lows, LME zinc is likely to see limited upside room in a lack of upbeat trading incentives. It is expected to stay at highs today with most transactions occurring at $2,650-2,700/mt. The SHFE 1904 contract overnight climbed to a high of 21,725 yuan/mt, paring all the losses made during the daytime of Thursday, before it ended at 21,680 yuan/mt. The unwinding of short positions primarily accounted for the overnight rise in SHFE zinc. As it takes time to observe the consumption recovery after the holidays, SHFE zinc is expected to remain at highs today with a trading range of 21,450-21,950 yuan/mt.

Nickel: The three-month LME nickel fluctuated to close lower at $12,845/mt on Thursday. The SHFE 1905 contract climbed to a high of 101,810 yuan/mt overnight before it came off to close at 101,210 yuan/mt. LME nickel is expected to hover around $12,900/mt today with SHFE nickel at 100,500-102,000 yuan/mt. Spot prices are seen at 101,000-102,500 yuan/mt.

Lead: The three-month LME lead shrugged off resistance at the five- and 10-day moving averages to end at the day-high of $2,070/mt on Thursday. Such a sharp increase would ease bearish sentiment across the market. With strong performance in its LME counterpart, the SHFE 1904 contract climbed past the five- and 10-day moving averages to close overnight at 16,950 yuan/mt.

Tin: The three-month LME tin hit a high of $21,570/mt on Thursday before it lost most of those gains to end at $21,290/mt. Low LME tin inventories are expected to remain supportive of LME tin, with resistance at $21,500/mt. The SHFE 1905 contract traded rangebound around 150,700 yuan/mt overnight, moving above moving averages. Its strong LME counterpart and firm spot prices domestically are likely to fuel steam in SHFE tin, with resistance at 151,500 yuan/mt.