SMM Morning Comments (Mar 5)

SHANGHAI, Mar 5 (SMM) –

Copper: As a higher US dollar depressed most base metals, LME copper dipped to a low of $6,377/mt, and the SHFE 1905 contract fell below the 10-day moving average. While the greenback remains at highs and weighs on base metals today, expectations of further tax cuts policies at the two political sessions will boost market sentiment. Today, LME copper is expected to trade at $6,400-6,450/mt with the SHFE 1905 contract at 49,200-49,600 yuan/mt. Sellers are likely to raise spot offers to a discount of 40 yuan/mt to a premium of 100 yuan/mt as pricesof futures weaken. 

Aluminium: News around China’s further tax cuts depressed upward momentum in LME aluminium, which dipped to the lowest since February 20, at $1,861/mt, after it initially fell below the $1,900/mt level during the European trading session. The K indicator fell support from all moving averages, and beneath the Bollinger lower band. We expect LME aluminium to trade at $1,840-1,910/mt today with the SHFE 1905 contract at 13,350-13,700 yuan/mt. Last night, the contract registered the biggest drop since February 11, as it closed 1.42% lower at 13,540 yuan/mt. 

Zinc: As bullish macroconomic sentiment waned, LME zinc lost previous gains and closed 1.22% lower at $2,743.5/mt overnight, after it dipped to a low of $2,737/mt. However, fundamentals are likely to support it above the 10-day moving average today. This is expected to keep it trading at $2,725-2,775/mt today. The SHFE 1904 contract dropped to around the 10-day moving average, and closed 1.29% lower at 21,840 yuan/mt, as inventories continued to accumulate given tepid purchases. We see it trading at 21,700-22,200 yuan/mt today. 

Nickel: LME nickel faced resistance from a stronger US dollar but found support at $13,250/mt. Pressure from the Bollinger upper band capped it at $13,480/mt, ending it higher on the day at $13,280/mt. The SHFE 1905 contract unsuccessfully tested pressure at 104,700 yuan/mt, before shorts weighed it to a low of 103,460 yuan/mt and settled it at 103,840 yuan/mt. Today, the contract is likely to trade at 103,500-105,000 yuan/mt with its LME counterpart at $13,100-13,300/mt. Spot prices are set at 103,500-105,500 yuan/mt. 

Lead: Pressure from a higher US dollar and rising shorts lowered LME lead below the five-day moving average, to a low of $2,110/mt overnight. It is expected to test support at the $2,100/mt level. The SHFE 1904 contract declined after it climbed to a high of 17,680 yuan/mt, pressured by its weaker LME counterpart. It ended at 17,640 yuan/mt with open interests down 1,788 lots to 39,456 lots. We see it trading rangebound, weakly today. 

Tin: As LME tin inventories started to accumulate and the US dollar grew, LME tin fell to the lowest overnight at $21,370/mt, after it rose to a high of $2,1645/mt. It is expected to test support at the 20-day moving average and the $21,200/mt level today. The SHFE 1905 contract hovered below the daily moving average last night with the lowest level at 149,120 yuan/mt. We expect it to test support at 150,000 yuan/mt today.