SMM Morning Comments (Jan 10)

SHANGHAI, Jan 10 (SMM) –

Copper: Copper prices pulled back overnight as the British pound slipped to a 1-1/2-week low on Brexit uncertainty. Three-month LME copper lost 0.4% on the day to close at $6,164/mt. The most active SHFE 2003 contract dipped 0.14% to end at 48,910 yuan/mt in overnight trading. Deescalating US-Iran tensions and strong US employment data are positive for copper. LME copper is expected to move between $6,160-6,210/mt today, with SHFE copper at 48,800-49,100 yuan/mt. A substantial easing in demand forced spot traders to offer discounts instead of premiums on Thursday, but the discounts were modest as sellers were comfortable with cash flows. Spot discounts are seen at 50-10 yuan/mt today.

Aluminium: Three-month LME aluminium rallied to an intraday high of $1,817/mt on Thursday, before it gave back much of those gains to close just 0.19% higher at $1,804/mt. It is likely to move at $1,790-1,820/mt today. An aggressive load-up of long positions lifted the SHFE 2003 contract overnight. SHFE aluminium is expected to trade between 14,000-14,100 yuan/mt today. Spot prices are seen at a discount of 20 yuan/mt to a premium of 20 yuan/mt over the SHFE 2001 contract.

Zinc: Three-month LME zinc retreated from a near-two-month high of $2,416/mt on Thursday, as data showed that zinc stocks across LME warehouses rose 1,200 mt on the day. It shed 1.09% on the day to end at $2,365/mt, and is expected to move between $2,340-2,380/mt today. The most traded SHFE 2002 contract eased 0.49% in overnight trading and ended at 18,325 yuan/mt. Pressure is stiff at 18,500 yuan/mt, while support lies at the upper Bollinger band and the 60-day moving average. A sharp narrowing in Shanghai spot premiums and potential profit-taking by miners and smelters are likely to weigh on SHFE zinc, which is expected to trade between 18,100-18,500 yuan/mt today. Spot premiums for domestic 0# Shuangyan are seen lower at 140-180 yuan/mt over the SHFE 2001 contract.

Nickel: Three-month LME nickel advanced 0.36% on Thursday to end at $14,120/mt, marking a fourth straight trading day of gains. Whether it could stand above the 40-day moving average at $14,100/mt will come under scrutiny today. The most traded SHFE 2003 contract hovered around the daily moving average at 111,700 yuan/mt overnight, and ended up 0.55% at 111,350 yuan/mt. Whether it could cling to the 112,000 yuan/mt level will come under scrutiny today.

Lead: Three-month LME lead rose to a two-week high of $1,946/mt on Thursday, before it eased to close the trading day 1.05% higher at $1,930.5/mt. LME lead has yet to shrug off its recent lows. The most active SHFE 2002 contract pared earlier gains to end 0.13% firmer at 14,960 yuan/mt overnight. The SHFE lead rally appeared to be running out of steam, and prices are likely to pull back given bearish fundamentals.

Tin: Three-month LME tin surged to a three-week high of $17,355/mt on Thursday, before it erased some gains to finish the trading day 0.44% stronger at $17,205/mt. Resistance is seen at $17,500/mt. The most traded SHFE 2006 contract hovered around the daily moving average at 137,600 yuan/mt for much of overnight trading. It declined shortly before the closing bell as longs exited. It ended overnight trading 0.54% firmer at 137,190 yuan/mt. Support is seen at the 10-day moving average at 135,800 yuan/mt.