Evening Comments (Dec 17): Copper strengthened further, but gains capped by weak eurozone data

SHANGHAI, Dec 17 (SMM) – Shanghai copper prices retreated from early highs on Monday, as market euphoria over a preliminary trade deal reached between the US and China and pro-Brexit Conservative party victory in UK election faded. Dismal manufacturing activity data out of the eurozone also dampened market sentiment.

Copper gained 0.6% on the day, as nonferrous metals closed mostly higher. Aluminium advanced 0.7%, tin rose 0.4% and nickel climbed 0.2%, while zinc slipped 0.2% and lead fell 0.7%.

Aluminium was the best performer, as market sentiment was supported not only by macro optimism but also by falling inventories and firm spot premiums.

The ferrous complex traded mixed. Iron ore tumbled 2.8% to become the biggest loser, rebar shed 0.8% and hot-rolled coil declined 0.4%. Stainless steel gained 0.1%, coking coal rose 0.4% and coke crept up 0.7%.

Copper: The most active SHFE 2002 contract climbed to its highest since mid-April at 49,460 yuan/mt in afternoon trade, before it eased to close the day 0.63% higher at 49,260 yuan/mt. SHFE copper has risen above the 47,200 yuan/mt level, with technical indicators in a bullish bias.

As of December 16, copper stocks at LME warehouses fell to the lowest since April 2 at 167,475 mt, while inventories at COMEX warehouses steadied at 40,111 short tons. SHFE copper inventories stood at 117,245 mt as of December 13, lows in nearly a year.   

Aluminium: The most traded SHFE 2002 contract crept up to its highest in more than two months at 14,035 yuan/mt in morning trade, before it ended the trading day 0.68% firmer at 14,015 yuan/mt. Social inventories of primary aluminium ingots in China are likely to continue to fall this week, in light of stable consumption and slower arrivals amid adverse weather in northern regions. Tonight, SHFE aluminium is likely to reside around highs, with the chances of a further increase.

Zinc: The most active SHFE 2002 contract erased earlier gains to an intraday low of 18,005 yuan/mt, before closing down 0.22% at 18,040 yuan/mt. The converging and downward trending KDJ indicators indicate further downside for SHFE zinc, while generally positive macro environment and low zinc social inventories will offer support. SHFE zinc is likely to test support at 18,000 yuan/mt in seesaw trade tonight.

Lead: Pressure at the daily moving average kept the most active SHFE 2002 contract in a tight range around 14,930 yuan/mt during the day. SHFE lead finished the trading day 0.66% lower at 14,945 yuan/mt, returning to levels before the recent rally, as investors loaded up short positions. SHFE lead is likely to extend its decline, with no support from fundamentals or technical front.

Nickel: The most traded SHFE 2002 contract rose to a more than two-week high of 112,300 yuan/mt in morning trade, before it eased to close 0.15% stronger at 111,280 yuan/mt. Pressure at the middle Bollinger band at 112,000 yuan/mt will come under scrutiny tonight.

Tin: The most traded SHFE 2005 contract climbed to end the trading day 0.35% higher at 138,850 yuan/mt. Support lies at 137,500 yuan/mt.