SMM Morning Comments (Nov 19)

SHANGHAI, Nov 19 (SMM) –

Copper: Three-month LME copper declined 0.39% on Monday to end at $5,818.5/mt, while the most active SHFE 2001 contract fluctuated to close flat at 46,900 yuan/mt overnight. Dampened US-China trade deal hopes boosted risk-off sentiment, driving investors to safe-haven assets. Gold futures recovered to $1,470/oz, the yen briefly rose 0.3%, while copper prices failed to continue their rally. Copper prices are likely to recover slightly today, as the market appeared to have over-reacted to the trade pessimism and as Brexit hopes and China’s economic stimulus will offer support. LME copper is expected to move between $5,810-5,870/mt today, with SHFE copper at 46,800-47,100 yuan/mt. Spot premiums are seen firm at 130-160 yuan/mt given the need to fulfill long-term contracts and limited availability.

Aluminium: Three-month LME aluminium dropped 1.19% to $1,736.5/mt on Monday, reversing gains from last Friday. It is likely to move sideways or recover slightly today, with a range of $1,730-1,750/mt. The most traded SHFE 2001 contract held in a tight range overnight, ending up 0.44% at 13,760 yuan/mt. SHFE aluminium remained supported by falling inventories, and is expected to trade between 13,700-13,780 yuan/mt today. Spot premiums are seen at 60-100 yuan/mt over the SHFE 1912 contract.

Zinc: Three-month LME zinc slipped for a fifth straight day to a low of $2,337/mt, its lowest in more than five weeks, on Monday before it finished the trading day down 1.51% at $2,351.5/mt. LME zinc has fallen below the 60-day moving average, with an extended MACD green bar, and saw a narrower backwardation structure. But falling LME zinc inventories will offer some support to the prices. LME zinc is expected to remain weak between $2,330-2,380/mt today. The most active SHFE 2001 contract shed 0.16% to 18,295 yuan/mt overnight. Pressure from moving averages and a weaker LME counterpart will weigh on SHFE zinc, but a decline in social inventories domestically will lend some support. SHFE zinc is expected to trade rangebound today, moving at 18,200-18,500 yuan/mt. Spot premiums for domestic 0# Shuangyan are seen at 80-100 yuan/mt over the SHFE 1912 contract.

Nickel: Three-month LME nickel continued to weaken on Monday, plumbing a low of $14,615/mt before ending down 1.17% at $14,775/mt. LME nickel remains under the lower Bollinger band, and whether it could hold above $14,600/mt will come under scrutiny today. The most traded SHFE 2002 contract eased 0.95% to 116,230 yuan/mt overnight. It also stays below the lower Bollinger band, and strength at 115,000 yuan/mt should be closely watched today.

Lead: Three-month LME lead extended its decline to its lowest since August 5 at $1,951.5/mt on Monday, before it ended down 2.14% at $1,963/mt. Without an end to the downtrend in sight, confidence among longs will further wane. The most active SHFE 2001 contract followed LME lead lower overnight, falling to a three-year low of 15,610 yuan/mt before closing down 1.17% at 15,645 yuan/mt. Upside in SHFE lead will remain limited by its weakening LME counterpart.

Tin: Three-month LME tin weakened 0.62% on Monday, giving back earlier gains to close at a three-day low of $16,020/mt. Support is seen at $16,000/mt. As longs trimmed their positions, the most traded SHFE 2001 contract lost 0.19% to 134,650 yuan/mt overnight. SHFE tin now resides around the five-day moving average, with support at 134,000 yuan/mt.