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SMM Morning Comments (Oct 17)
Oct 17,2019 09:40CST
price review forecast
SHFE base metals traded mixed overnight

SHANGHAI, Oct 17 (SMM) –

Copper: Copper prices extended their declines overnight, as downbeat economic data out of the US, UK and eurozone exacerbated worries about the global economic conditions. Risk appetite waned also on fading optimism about US-China trade relations. Oil prices dropped after an industry report showed that US crude inventories increased sharply last week. Three-month LME copper shed 0.93% on the day to $5,721.5/mt, while the most active SHFE 1912 contract lost 0.53% overnight to 46,630 yuan/mt, nearing a more than one-month low of 46,500 yuan/mt it plumbed last week. Copper prices are expected to remain weak today, with LME copper moving at $5,680-5,740/mt and SHFE copper at 46,500-46,900 yuan/mt. Spot premiums are seen firmer at 60-100 yuan/mt, as prices of futures slipped and also traders need to fulfill their long-term contracts.

Aluminium: Three-month LME aluminium recovered from earlier losses to end 0.12% weaker at $1,727.5/mt on Wednesday. Traders aggressively covered long positions on Wednesday, as they see limited upward momentum in LME aluminium with high inventories across LME-approved warehouses. A weaker US dollar might provide some support to base metals today. LME aluminium is expected to trade between $1,710-1,740/mt. The most traded SHFE 1912 contract advanced 0.11% to 13,815 yuan/mt overnight, approaching the five-day moving average. SHFE aluminium, faced with a resistance confluence of the 10- and 40-day moving averages, is expected to trade between 13,750-13,900 yuan/mt today. Spot premiums are seen at 30-70 yuan/mt. 

Zinc: Three-month LME zinc fluctuated to close 0.33% weaker at $2,417.5/mt on Wednesday. Dismal US retail sales data, together with a smaller decline in LME zinc inventories and a narrower backwardation, will weigh on LME zinc today, which is expected to move between $2,390-2,440/mt. The premium for LME cash zinc over the three-month contract narrowed to $20.25/mt on Wednesday. The most active SHFE 1912 contract recovered somewhat from a lower open overnight, and ended down 0.4% at 18,905 yuan/mt. Technical indicators suggested limited steam in SHFE zinc, as it has fallen below the middle Bollinger band, with KDJ lines expanding downwards and MACD red bar shortened. SHFE zinc is expected to move under pressure today, at a range of 18,600-19,100 yuan/mt, as disappointing US retail sales grew concerns about the world economic growth. Spot premiums for 0# Shuangyan are seen at 110-130 yuan/mt over the 1911 contract.   

Nickel: Three-month LME nickel dropped below the 60-day moving average and the lower Bollinger band to a nearly seven-week low of $16,350/mt on Wednesday, before it finished the trading day 3.64% lower at $16,390/mt. Whether it could remain above $16,200/mt will be closely watched today. The most traded SHFE 1912 contract tumbled to the lowest since September 2 at 129,900 yuan/mt overnight, as traders loaded up short positions. It closed down 1.86% at 130,220 yuan/mt. Whether SHFE nickel could cling to the lower Bollinger band and 130,000 yuan/mt handle will come under scrutiny today.

Lead: Three-month LME lead rose on Wednesday for a second day in a row, advancing 0.88% to $2,168/mt. Resistance at $2,200/mt will come under scrutiny in the near term. Tracking gains in LME lead, the most active SHFE 1911 contract strengthened 0.95% overnight and ended at more than one week highs of 17,065 yuan/mt. On the backdrop of weak fundamentals, upward momentum in SHFE lead is dictated by its LME counterpart.

Tin: Three-month LME tin rose to a one-month high of $16,990/mt on Wednesday, before it erased some gains to close the trading day 0.93% higher at $16,875/mt. Resistance is seen at $17,000/mt. The most traded SHFE 2001 contract hit the highest since September 16 at 139,640 yuan/mt overnight, before it ended up 0.85% at 139,430 yuan/mt. This sent it above all moving averages. SHFE tin now faces resistance at 140,000 yuan/mt.

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