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SMM Morning Comments (Oct 9)
Oct 9,2019 09:42CST
price review forecast
SHFE base metals traded mostly lower overnight


Copper: A stronger US dollar weighed on copper prices overnight, as Fed Chairman Powell said the central bank would expand its balance sheet “soon,” and as Brexit talks between the UK and the European Union were reportedly close to breaking down. Three-month LME copper shed 0.42% on the day and closed at $5,683.5/mt. The most active SHFE 1912 contract slipped to a more than one-month low of 46,530 yuan/mt overnight before it closed 0.51% lower at 46,680 yuan/mt. Copper prices are unlikely to substantially pick up today, as investors tread cautiously ahead of a fresh round of trade negations between Washington and Beijing. Growing worries about the world economy after a slew of disappointing economic data, combined with geopolitical turmoil, will continue to pressure copper prices. LME copper is expected to trade between $5,670-5,720/mt today, with SHFE copper at 46,400-46,900 yuan/mt. Spot premiums are seen firm at 80-120 yuan/mt, as lower prices of futures will deter sellers from lowering their offers.

Aluminium: Three-month LME aluminium on Tuesday climbed to a high of $1,760/mt, the highest in nearly two weeks, before it gave back all those gains to finish the trading day 0.4% lower at $1,744/mt, below the 20-day moving average. Rising LME inventories pressured aluminium prices. The contract is expected to move between $1,730-1,760/mt today. The load-up of long positions shored up the most traded SHFE 1912 contract to a high of 14,020 yuan/mt overnight, before moving averages pressured the contract to give back most of those gains to close a tad higher at 13,960 yuan/mt. Backwardation on SHFE aluminium reflected limited steam in the 1912 contract. The contract is expected to trade between 13,900-14,100 yuan/mt today.

Zinc: Three-month LME zinc fluctuated to close marginally higher at $2,292/mt on Tuesday. Falling LME zinc inventories may lend some support to LME zinc prices, but concerns about global economic slowdown and macro uncertainty will weigh. LME zinc is expected to trade between $2,260-2,310/mt today. The most active SHFE 1911 contract relinquished earlier gains to close 0.19% lower at 18,670 yuan/mt overnight. SMM data showed a smaller-than-expected increase in social inventories of refined zinc across Shanghai, Tianjin and Guangdong over the week-long holiday, which offered some support to SHFE zinc. SHFE zinc is expected to trade rangebound today, as investors monitor developments in US-China trade talks. The SHFE 1911 contract is likely to move between 18,500-19,000 yuan/mt, with spot premiums for 0# Shuangyan at 110-140 yuan/mt over the 1910 contract.

Nickel: Three-month LME nickel slipped past the 10- and 20-day moving averages to a one-week low of $17,135/mt on Tuesday, before it clawed back some losses to close the trading day 1.47% lower at $17,450/mt. LME nickel is expected to try to hold onto the 10-day moving average and the $17,500/mt level today. The most traded SHFE 1912 contract inched down to end at 136,730 yuan/mt overnight, but held onto a tight range around 137,000 yuan/mt. It is expected to try to remain above the five-day moving average today.

Lead: Three-month LME lead dropped 2.04% to end at $2,137.5/mt on Tuesday, pulling back from a 14-month high of $2,192/mt hit on Monday. LME lead temporarily suspended its uptrend, but support is still seen from the technical front. The most active SHFE 1911 contract followed its LME counterpart lower overnight, shedding 0.96% to 17,040 yuan/mt. Support is seen at 17,000 yuan/mt, but a break below that level is expected as consumption will weaken in the fourth quarter and recovering smelter margin will bolster supply.  

Tin: Three-month LME tin fell to a nearly one-week low of $16,250/mt on Tuesday, before it recovered some ground to close the trading day 0.4% lower at $16,370/mt. LME tin now resides around the 10-day moving average, with resistance seen at the 20- and 40-day moving averages, as high as $16,700/mt. As longs added their positions, the most traded SHFE 2001 contract rose 1.35% overnight and ended at 136,320 yuan/mt. The contract now stays around the five-, 10- and 60-day moving averages, and resistance is seen at 136,500 yuan/mt.

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