SMM Morning Comments (Jan 9)

SHANGHAI, Jan 9 (SMM) –

Copper: Copper prices firmed overnight, as fears of a larger conflict in the Middle East abated on milder rhetoric between Iran and the US, which led gold prices to ease off a seven-year peak. A better-than-expected US private payrolls report for December also helped boost market sentiment. Three-month LME copper advanced 0.31% on the trading day to end at $6,189/mt. The most active SHFE 2003 contract gained 0.33% in overnight trading and closed at 48,970 yuan/mt. With anxiety defused somewhat, LME copper is expected to move between $6,160-6,220/mt today, with SHFE copper at 48,900-49,200 yuan/mt. Spot premiums are seen at a maximum of 40 yuan/mt, as higher futures prices will dampen already lukewarm buying interest.  

Aluminium: Three-month LME aluminium extended its decline on Wednesday, shedding 0.96% to end at $1,800.5/mt. The buildup of short positions primarily accounted for the loss. LME aluminium is expected to trade at $1,780-1,820/mt today. The most traded SHFE 2002 contract wavered to close 0.11% weaker at 14,080 yuan/mt overnight. It is likely to move at 13,900-14,100 yuan/mt today. Spot premiums are seen at 70-90 yuan/mt over the SHFE 2001 contract.

Zinc: Three-month LME zinc climbed to its highest since November 14 at $2,415/mt on Wednesday, before it erased some gains to close the trading day 1.66% higher at $2,391/mt, sitting above the 60-day moving average and the upper Bollinger band. Falling inventories bolstered prices. Zinc stocks across LME warehouses decreased 0.64% on the day to 50,175 mt, near lows of 2019. LME zinc is expected to trade between $2,370-2,420/mt today. The most active SHFE 2003 contract jumped to a nearly two-month high of 18,555 yuan/mt in early trade overnight, before it ended the session 0.52% firmer at 18,460 yuan/mt. SHFE zinc now faces resistance at 18,500 yuan/mt. Despite the imminent Chinese New Year holiday, social inventories of refined zinc in China continued to fall. This, coupled with higher spot premiums in Shanghai, encouraged traders to go long. But a potential easing in Shanghai supply shortages on the back of deliveries from Guangzhou and Tianjin, and weakening consumption following the holiday-shutdown of downstream consumers will hamper upside potential in SHFE zinc. The SHFE 2003 contract is expected to trade at 18,100-18,600 yuan/mt today. Spot premiums for domestic 0# Shuangyan are seen lower at 200-230 yuan/mt over the SHFE 2001 contract.

Nickel: Three-month LME nickel broke above the five-day moving average to a high of $14,135/mt on Wednesday, before it finished the trading day 1.15% higher at $14,070/mt. It is likely to test pressure at the 10-day moving average today. As longs added their positions, the most traded SHFE 2003 contract surpassed the 110,000 yuan/mt level overnight, gaining 1.41% to end at 110,310 yuan/mt. Whether it could remain above 110,000 yuan/mt and shrug off resistance at the 10-day moving average will come under scrutiny today.

Lead: Three-month LME lead rose to an intraday high of $1,930/mt on Wednesday, before it gave back much of those gains to close the trading day just 0.13% higher at $1,910.5/mt. LME lead continued to hover around $1,900/mt and did not have a clear direction. The most active SHFE 2002 contract fluctuated to close 0.37% higher at 14,920 yuan/mt overnight. SHFE lead has risen for three consecutive days, but remains under pressure at the 20-day moving average. It may pull back in the short term.

Tin: Three-month LME tin recovered from earlier losses to end the trading day 0.97% higher at $17,130/mt. Resistance is seen at $17,200/mt, the lower end of the range where LME tin hovered in the middle of December. The load-up of long positions took the most traded SHFE 2006 contract to a session-high of 136,300 yuan/mt in overnight trading, before the contract ended 0.25% stronger at 135,960 yuan/mt. Resistance is seen at 136,800 yuan/mt.