SMM Morning Comments (Apr 10)

SHANGHAI, Apr 10 (SMM) –

Copper: Three-month LME copper hit a high of $6,540/mt on Tuesday before it pared much of those gains to end marginally higher at $6,487/mt. As longs took profits, the most traded SHFE June contract also came off from earlier highs of 49,990 yuan/mt overnight, ending at 49,560 yuan/mt. LME copper remains above all short-term moving averages while SHFE copper recovered from a sharp decline at the start of March and received support from several moving averages. Copper prices are expected to extend their gains. LME copper is expected to trade at $6,460-6,510/mt today with SHFE copper at 49,400-49,900 yuan/mt. Spot premiums are seen up to 130 yuan/mt. Losses in prices of futures are expected to encourage spot sellers to hold offers firm.

Aluminium: Three-month LME aluminium fluctuated to end 0.3% higher at $1,879/mt on Tuesday, with its trading level barely changed from the previous day. With US-Europe trade tension and weaker forecasts from the IMF, LME aluminium is expected to perform weakly today, with most transactions at $1,850-1,890/mt. Longs in Shanghai added close to 5,000 lots of positions in 20 minutes after overnight opening. This bolstered the most active SHFE May contract a seven-day high of 13,880 yuan/mt, near the year-high of 13,900 yuan/mt hit on April 1. As some longs took profits, it pared some gains to end at 13,820 yuan/mt, posting a five-day winning streak. Declining inventories and improving consumption will continue to offer support, with pressure from previous highs. SHFE aluminium is expected to trade at 13,780-13,880 yuan/mt today with spot premiums of up to 20 yuan/mt.

Zinc:  Extended gains in LME zinc inventories weighed on three-month LME zinc on Tuesday, which dropped 1.57% to close at $2,853.5/mt. With weaker support from fundamentals, LME zinc is expected to continue its downward correction in the short term. It is likely to trade between $2,825-2,875/mt and test support at the middle Bollinger band today. The June contract became the most active SHFE zinc contract overnight. As shorts flocked in, the SHFE 1906 contract fell to a low of 22,220 yuan/mt before it traded rangebound to end at 22,325 yuan/mt. Open interest for forward contracts maintained a decent growth pace in anticipation of capacity resumption. As support from consumption recovery wanes, SHFE zinc is expected to trade at 22,000-22,500 yuan/mt.

Nickel: Following a decline in crude oil prices, three-month LME nickel relinquished some earlier gains to end close to 0.3% higher at $13,235/mt on Tuesday. SHFE nickel overnight was also impacted by weaker oil prices. The most traded SHFE June contract came off from earlier highs of 103,730 yuan/mt to end at 103,200 yuan/mt. LME nickel is expected to trade rangebound between $13,150-13,350/mt today. SHFE nickel is expected to trade at 102,000-104,000 yuan/mt with spot prices at 102,500-104,500 yuan/mt.

Lead: Three-month LME lead on Tuesday came off from a high of $2,014.5/mt, past the five- and 10-day moving averages, to $1,978.5/mt, its lowest in close to three months. It finished the trading day 0.4% lower at $1,983/mt. SMM expects further downside room in LME lead. Losses in LME lead weighed on its Shanghai counterpart overnight, and prompted shorts to add positions, with the most active SHFE May contract losing 0.65% to close at a low of 16,765 yuan/mt. SHFE lead has traded rangebound at the current region for 15 days. As shorts aggressively loaded up their positions, SHFE lead might see further downside room in the short run.

Tin: Three-month LME tin continued its rangebound pattern on Tuesday, and ended higher at $20,885/mt. It is expected to remain rangebound in the short term with support at $20,500/mt and resistance at $21,000/mt. The most liquid SHFE May contract dipped to end at 148,150 yuan/mt overnight. It continued to stay at highs, with resistance at 149,000 yuan/mt and support at 147,500 yuan/mt.