SMM Morning Comments (Mar 7)

SHANGHAI, Mar 7 (SMM) –

Copper: Concerns over slower US economic growth and a higher US dollar for six consecutive trading days weighed on copper prices overnight. LME copper dipped to a low of $6,439/mt before it closed at $6,455/mt. The SHFE 1905 contract also fell to the lowest overnight at 49,350 yuan/mt near closing, after it fell below the daily moving average from a high of 49,630 yuan/mt. Today, the contract is likely to trade at 49,300-49,700 yuan/mt, with LME copper at $6,435-6,495/mt. Spot offers are seen at a discount of 80 yuan/mt to a premium of 40 yuan/mt today as a seasonal lull may continue to expand spot discounts. 

Aluminium: As longs exited and the US dollar remained robust, LME aluminium unsuccessfully tested pressure above and dropped to a low of $1,860/mt. It settled at $1,862.5/mt, with open interests down 3,711 lots to 660,000 lots. The SHFE 1905 contract fell below all moving averages to a low of 13,465 yuan/mt as most base metals weakened. It is likely to trade at 13,350-13,650 yuan/mt, with its LME counterpart at $1,840-1,890/mt today. Spot discounts are set at 70-30 yuan/mt. 

Zinc: Continued decline in LME zinc inventories provided upward momentum in prices, which climbed to a high of $2,803.5/mt. With pressure from a steady US dollar, LME zinc failed to stand firm above the $2,800/mt level, and ended at $2,784.5/mt. Heavy resistance above is likely to see it at $2,760-2,810/mt today. Last night, the dominant contract transferred to the SHFE 1905 contract, which received a boost from its higher LME counterpart, and closed higher at 21,710 yuan/mt after rose to highs around 21,800 yuan/mt. Without any significant improvement in downstream demand, the contract is likely to trade at 21,500-21,900 yuan/mt today. 

Nickel: As base metals ended mostly lower overnight, the SHFE 1905 contract lost 0.35% to close at 105,670 yuan/mt, with LME nickel down 0.11% to $13,635/mt. In the domestic spot market, discounts of nickel pig iron over refined nickel expanded. Despite an increase in prices of stainless steel, tepid purchases will limit its upward room today. We expect the SHFE 1905 contract to weaken to 105,000-105,800 yuan/mt, with spot prices at 106,400-107,300 yuan/mt today. 

Lead: A weaker SHFE 1904 contract dragged LME lead, which slid to a low of $2,087.5/mt, but found support at the 10-day moving average. The SHFE 1904 contract registered the fourth consecutive trading day of decline, as it closed at 17,510 yuan/mt, after fell to a low of 17,470 yuan/mt. We expect it to continue to moderate today. 

Tin: A buildup of 200 mt in LME tin inventories and pressure above from the five-, and 10-day moving averages depressed LME tin to a low of $21,400/mt, after it climbed to a high of $21,550/mt. Support below is set at $21,300/mt today. The SHFE 1905 contract consolidated around the daily moving average, with resistance from the 40-day moving average. It will maintain the rangebound trend with support at 147,500 yuan/mt, and pressure at 150,000 yuan/mt today.