SMM Morning Comments (Mar 21)

SHANGHAI, Mar 21 (SMM) –

Copper: With short-covering after the US dollar index tumbled below 96, the three-month LME copper rose to a high of $6,497/mt in late trade on Wednesday. It gained 0.53% to finish the trading day at $6,493/mt. The most active SHFE copper May contract hovered around the daily moving average overnight, ending 0.16% lower at 49,210 yuan/mt. Weakness in the greenback and strength in oil prices are likely to buoy copper prices. LME copper is expected to trade at $6,440-6,500/mt today with its SHFE counterpart at 49,100-49,600 yuan/mt. Spot premiums are expected to stay highs before the value-added tax cuts take effect, and seen at 850-1,100 yuan/mt today.

Aluminium: The three-month LME aluminium rose to a new three-month high of 1,951/mt on Wednesday, bolstered by the report that Rio Tinto suspended operations at its bauxite mine in north Australia due to a cyclone. LME aluminium later pared those gains to close the trading day 0.26% lower at $1,935/mt. Norsk Hydro reported some progress in restoring operations after it was hit by a cyber attack. Overnight losses in the US dollar will likely offer support to LME aluminium, which is expected to trade at $1,860-1,960/mt today. As longs took profits, the most liquid SHFE aluminium May contract weakened shortly before closing. It edged up 0.15% to close overnight at 13,780 yuan/mt. In anticipation of consumption recovery, SHFE aluminium is expected to trade at 13,600-13,900 yuan/mt today. Spot premiums are seen at 220-260 yuan/mt.

Zinc: Following a drop in the US dollar index, the three-month LME zinc rose to a high of $2,880/mt on Wednesday, just shy of a nearly nine-month high of $2,882/mt hit last Friday. It rose 2.24% on the day and ended at $2,878/mt. LME zinc might stage a downward correction after overnight gains and is expected to trade at $2,840-2,890/mt today. With relatively weak fundamentals domestically, the most traded SHFE zinc May contract saw a much smaller gain overnight, compared with its LME counterpart. It gained 0.85% to close at 21,930 yuan/mt. While SHFE zinc has stood firmly above all moving averages, investors remain keen to sell at highs as seasonally inventory pressure continues. The contract is expected to trade at 21,700-22,150 yuan/mt today.

Nickel: A substantial decline in LME nickel inventories and a drop in the US dollar bolstered the three-month LME nickel on Wednesday, which climbed 1.41% to finish the trading day at $13,340/mt. The most traded SHFE nickel May contract fluctuated to end overnight marginally higher at 102,670 yuan/mt. LME nickel is expected to trade at $13,200-13,400/mt today with its SHFE counterpart at 102,500-104,000 yuan/mt. Spot prices are seen at 104,500-106,500 yuan/mt.

Lead: With support from institutional investors, the three-month LME lead recovered from earlier losses to finish Wednesday 0.49% higher at $2,045.5/mt. While LME lead has stemmed its declines, downwardly expanding five- and 10-day moving averages suggest strong downward pressure on LME lead. The most active SHFE lead May contract initially rose to a high of 16,910 yuan/mt overnight before it hovered around 16,855 yuan/mt in a tight range to end lower at 16,845 yuan/mt.

Tin: The three-month LME tin extended its gains on Wednesday, closing 0.26% higher at $21,360/mt, just below the 20-day moving average. A weak US dollar and declining LME tin inventories will continue to support LME tin in the short run. Resistance is seen at $21,400/mt, with next resistance at $21,800/mt. Support is seen at $21,000/mt. The most liquid SHFE tin May contract climbed to a nearly two-week high of 148,400 yuan/mt overnight before it pared some gains to end 0.1% higher at 147,650 yuan/mt. A strong LME counterpart and firm spot prices in China accounted for the rebound in SHFE tin. The contract is likely to continue to rise in the near term with resistance at 149,000 yuan/mt.