SMM Morning Comments (Mar 6)

SHANGHAI, Mar 6 (SMM) –

Copper: LME copper dipped after it climbed to a high of $6,498.5/mt, as the US dollar strengthened. It fell to around the daily moving average, or $6,465/mt, before it closed at $6,483/mt, with open interests down 1,506 lots to 296,000 lots. Rising shorts weighed the SHFE 1905 contract to a low of 49,340 yuan/mt near closing, after it rose to a high of 49,670 yuan/mt. Pressure from the five- and 10-day moving averages above is likely to limit its upward momentum today. We see it trading at 49,300-49,700 yuan/mt with LME copper at $6,420-6,470/mt today. News of further tax cuts in manufacturing bolstered speculative demand, which may lift spot offers to a premium of 120 yuan/mt today. 

Aluminium: LME aluminium rebounded after it fell below all moving averages. A higher US dollar kept it below the 40-day moving average and ended it lower on the day at $1,871/mt. Currently at the Bollinger lower band, it is likely to trade at $1,840-1,900/mt today. The SHFE 1905 contract rallied after declined, and closed higher at 13,590 yuan/mt. The backwardation of SHFE aluminium contracts remained, but narrowed overnight. Today, the 1905 contract is likely to trade at 13,500-13,680 yuan/mt with spot discounts at 80-40 yuan/mt. 

Zinc: Falling LME zinc inventories that approached record lows grew concerns over supply, and buoyed LME zinc to a high of $2,784.5/mt overnight. However, it failed to shrug off pressure at the $2,800/mt level, and closed at $2,781.5/mt. We see it trading at $2,745-2,795/mt today. A higher LME zinc and bullish sentiment in the market lifted the SHFE 1904 contract above 22,000 yuan/mt, and settled it at 22,065 yuan/mt. It is likely to trade at 21,800-22,300 yuan/mt, with current high inventories weighing on its upward momentum in the short term. 

Nickel: Macroeconomic developments rallied LME nickel to a high in nearly six and a half months, of $13,725/mt. It closed at $13,650/mt, with nickel inventories across LME warehouses shrinking 132 mt to 196,410 mt. The SHFE 1905 contract also traded robustly to a high of 106,370 yuan/mt, but lower oil prices ended it at 105,950 yuan/mt. The 105,500 yuan/mt level continued to provide support. Today, it is expected to trade at 105,500-106,500 yuan/mt, with LME nickel at $13,500-13,800/mt. Spot prices are set at 105,500-107,000 yuan/mt. 

Lead: LME lead moderated and registered the third consecutive trading day of decline, as it closed at $2,101.5/mt after fell to a low of $2,084/mt. Support remained at the 10-day moving average and this is likely to keep prices around $2,100/mt today. The SHFE 1904 contract creased its decline at 17,530 yuan/mt, and ended at 17,560 yuan/mt last night. Open interests lost 1,646 lots to 36,790 lots. We expect it to trade weakly, rangebound today. 

Tin: Lower LME tin inventories continued to support prices overnight, and kept them around the 10-day moving average. The five-day moving average above exerted some pressure. LME tin is likely to remain at highs with support at $21,300/mt today. Exiting longs lowered the SHFE 1905 contract, after it increased to a high of 149,850 yuan/mt overnight. It ended at 149,160 yuan/mt, with resistance at the 20-day moving average. Today, it is expected to face continued pressure at 150,000 yuan/mt.