SMM Morning Comments (Feb 26)

SHANGHAI, Feb 26 (SMM) –

Copper: After hitting a high of $6,540/mt, the three-month LME copper fell in American trade on Monday and ended at $6,485.5/mt. Losses in LME copper prompted longs in Shanghai to cover positions, lowering the most traded SHFE April copper contract to a low of 49,980 yuan/mt overnight. The contract later pared some losses to end at 50,190 yuan/mt. While copper prices pulled back overnight, hopes for a US-China trade deal and concerns over supplies, sparked by the uncertain restart of Vedanta’s copper smelter, output cuts at Glencore’s copper mine and declining concentrate treatment charges, would be supportive of copper prices in the near term. LME copper is expected to trade at $6,455-6,520/mt today with SHFE copper at 49,900-50,400 yuan/mt. Spot discounts are seen at 200-90 yuan/mt as declines in prices of futures are likely to improve purchasing interest.

Aluminium: The three-month LME aluminium fell from a high of $1,925/mt, which was also the highest in the previous trading day, to end Monday 0.6% lower at $1,903/mt, paring gains in the prior day. Weak fundamentals weighed on LME aluminium, despite losses in the US dollar and gains across metals. The contract is expected to hover in wide range today with most transactions occurring at $1,890-1,920/mt. The most active SHFE April aluminium contract fluctuated to close overnight flat at 13,740 yuan/mt. SHFE aluminium faces uncertainties surrounding costs and consumption. The contract is expected to trade at 13,600-13,800 yuan/mt today with spot discounts at 100-60 yuan/mt.

Zinc: The three-month LME zinc fluctuated to end Monday marginally lower at $2,711/mt. Continued declines in LME zinc inventories are unlikely to substantially bolster LME zinc as the contract has already stayed at relatively high levels. LME zinc is likely to remain rangebound with most transactions occurring at $2,695-2,740/mt today. The most liquid SHFE April zinc contract also saw volatile trading overnight, closing 0.5% lower at 21,755 yuan/mt. SHFE zinc stemmed its recent gains overnight as rising social inventories across Shanghai, Guangdong and Tianjin and slow consumption recovery kept buyers cautious. The SHFE 1904 contract is expected to remain rangebound at highs with a trading range of 21,600-22,000 yuan/mt today.

Nickel: The three-month LME nickel retreated from earlier highs to a low of $12,875/mt on Monday, before it closed at $12,970/mt. As crude prices tumbled, the most active SHFE May nickel contract fell to a low of 101,150 yuan/mt in early trade overnight. LME nickel is expected to trade at $13,000-13,200/mt today with SHFE nickel at 101,500-103,000 yuan/mt. Spot prices are seen at 102,000-103,500 yuan/mt.

Lead: The three-month LME lead climbed above the 20-day moving average to end Monday at $2,081/mt, recovering from losses in Asian trade. LME lead has rose for four consecutive trading days and is expected to test pressure at $2,100/mt in the near term. The most active SHFE April lead contract edged down 0.03% to finish overnight at 17,100 yuan/mt, keeping it at highs. The contract traded rangebound as fundamentals prompted shorts to add positions while trade optimism drove longs to build positions.

Tin: The three-month LME tin extended its gains to end at $21,795/mt on Monday, standing above all short-term moving averages. With LME tin inventories staying at lows, LME tin is expected to remain at highs in the short run. The most traded SHFE May tin contract traded rangebound overnight after rebounding from earlier lows, ending at 152,180 yuan/mt. SHFE tin saw sharp gains after an accident at a mine in Inner Mongolia.