Evening Comments (Dec 30): Copper weakened as Chinese smelters failed to agree production cuts

SHANGHAI, Dec 30 (SMM) – Shanghai copper prices closed lower on Monday, snapping a four-day winning streak, as Chinese top copper smelters failed to reach an agreement on production cuts next year.

Copper prices received a boost last week, from expectations that the China Smelters Purchase Team (CSPT), consisting of top Chinese copper smelters, might agree to curtail production next year when they met in the southeastern city of Fuzhou on Thursday.

SHFE nonferrous metals closed mixed on the day. Zinc was the best performer with a 1.2% increase, nickel gained 0.3% and aluminium advanced 0.2%. Lead shed 0.2% and copper slipped 0.4%.

Tin was the biggest loser, closing 1.4% lower, as it recouped some losses from an almost 4% plunge to a one-month low of 133,000 yuan/mt on Friday night after data showed that tin stocks across SHFE-approved warehouses rose by almost one-third last week to 5,351 mt.

The ferrous complex cruised higher across the broad. Coking coal climbed 0.8%, rebar rose 0.2%, stainless steel and hot-rolled coil gained more than 0.1%, coke inched up 0.05%, while iron ore closed flat.

China’s central bank over the weekend said that it will use the loan prime rate as a new benchmark for pricing current floating-rate loans, a move that analysts said would cut borrowing costs and give the economy a boost.

US gold prices, meanwhile, held near a two-month peak, indicating persistent risk aversion sentiment.

Economic data including Germany retail sales, US goods trade balance, wholesale inventories, Chicago PMI, pending home sales, Dallas Fed manufacturing business index are slated for release tonight.

Copper: The most active SHFE 2002 contract climbed in the daytime session, recovering some ground from a slip in Friday’s night session to finish the trading day 0.36% lower at 49,510 yuan/mt. SHFE copper has fallen below the five-day moving average, and whether it could remain above 49,500 yuan/mt will come under scrutiny tonight.

Aluminium: The most traded SHFE 2002 contract eased in the Monday’s daytime session, giving back gains from Friday night to close just 0.21% firmer at 14,090 yuan/mt. Prices dropped in morning trade, after SMM data showed that social inventories of primary aluminium ingots in China increased 2,000 mt over the weekend, the first increase since late August. The 2002 contract is expected to move between 13,950-14,050 yuan/mt tonight, as traders appear to have priced in the news of inventory increase. Notably, investors increased their short positions in the 2003 and 2004 contracts.

Zinc: The most active SHFE 2002 contract rose for a second straight day to notch its highest close in a week, and came under resistance at the 40-day moving average. It gained 1.17% on the day to end at 18,105 yuan/mt. Quieter trades in the physical market and lower spot premiums are likely to limit upside in SHFE zinc.

Nickel: The most traded SHFE 2003 contract fluctuated to close 0.34% higher at 111,720 yuan/mt. Resistance at the five-day moving average will come under scrutiny tonight.

Lead: The most active SHFE 2002 contract tumbled to an intraday low of 15,140 yuan/mt shortly before closing bell, as shorts flocked in. It later recovered some ground and finished the trading day 0.23% weaker at 15,185 yuan/mt, remaining in its recent range. Support from a confluence of the 10- and 20-day moving averages is likely to keep SHFE lead from falling sharply tonight.

Tin: The most traded SHFE 2005 contract hovered below the daily moving average, around 136,200 yuan/mt during the daytime session, and closed down 1.35% at 136,360 yuan/mt. Support is seen at 136,000 yuan/mt.