Evening Comments (Dec 18): Copper retreated on revived hard Brexit fears

SHANGHAI, Dec 18 (SMM) – Shanghai copper prices weakened on Wednesday, snapping a two-week rally, as caution returned following UK Prime Minister Boris Johnson’s vow to block an extension of EU trade talks beyond 2020, reviving fears of a “no deal” Brexit.

A pullback in crude oil prices also dampened market sentiment, as US industry data showed a surprise build in crude stocks.

Copper slipped 0.4%, with Shanghai nonferrous metals closing mixed on the day. Nickel tumbled 2.5% and zinc fell 0.7%, while lead inched up 0.1%, tin rose 0.7% and aluminium advanced 0.9%.

Aluminium was the stellar performer on Wednesday, as firm spot prices supported by slower-than-expected production recovery and transport restrictions in snowy weather in north China, and bullish technical indicators boosted investor sentiment.

The ferrous complex also saw mixed performance. Iron ore remained the biggest loser, albeit with a smaller decline of 0.9%. Rebar and coking coal shed less than 0.1%, hot-rolled coil rose 0.4% and coke climbed 1.2%.

Copper: The most active SHFE 2002 contract shed 0.37% on the day to end at 49,070 yuan/mt, with a shortened MACD red bar suggesting limited upward momentum in SHFE copper. The contract is likely to test 49,000 yuan/mt tonight.

Aluminium: The most traded SHFE 2002 contract climbed to its highest since September 25 at 14,130 yuan/mt, before it ended the day 0.93% higher at 14,100 yuan/mt. SHFE aluminium is expected to remain firm in the near term, but there are risks of downward correction as speculative longs may book profits. SMM will release China primary aluminium inventory data on Thursday, which are expected to show another decline, and will offer support to prices.

Zinc: The most active SHFE 2002 contract extended overnight losses during the day, closing down 0.66% at 17,960 yuan/mt. It will come under pressure from 18,000 yuan/mt tonight, but there is still support at the five-day moving average. A slightly shortened MACD green bar and generally improved macro environment will also offer some support.

Nickel: The load-up of short positions knocked the most traded SHFE 2002 contract below the five-and 20-day moving averages to a one-week low of 108,510 yuan/mt in afternoon trade, before the contract finished the trading day down 2.49% at 108,760 yuan/mt, near the 10-day moving average. Whether SHFE nickel could hold above 108,000 yuan/mt will come under scrutiny tonight.

Lead: The most active SHFE 2002 contract slipped to a new of 14,750 yuan/mt in early morning trade. This was near the costs for smelting battery scrap into lead bullion, prompting some shorts to take profits and helping SHFE lead recoup those losses to close 0.1% higher at 14,955 yuan/mt. SHFE lead is likely to continue to waver around 15,000 yuan/mt tonight, as today’s narrowing in secondary refined lead discounts may drive some short-covering, and as LME lead remains in its recent range.  

Tin: As longs continued to add their positions, the most traded SHFE 2005 contract extended overnight gains to an intraday high of 139,860 yuan/mt, before it closed 0.74% higher at 139,710 yuan/mt. Resistance is seen at 140,500 yuan/mt.