SMM Evening Comments (Jan 14): Copper rose ahead of US-China trade deal

SHANGHAI, Jan 14 (SMM) – SHFE nonferrous metals fell for the most part on Tuesday, but copper advanced as investors awaited the signing of a phase-one trade deal between China and the US and ahead of a slew of Chinese data that will show whether a pick-up in economic activity has been maintained.

Copper climbed 0.8%, tin rose 0.57%, while aluminum lost 0.54%, lead shed 0.7%, zinc fell 0.55%, and nickel slumped 3.19%.  

The ferrous complex traded mostly higher as iron ore added 2.13%, rebar grew 0.59%, hot-rolled coil increased 0.47%, coke edged slightly higher, while stainless steel shed 1.46%. 

Copper: The most-traded SHFE 2003 contract held onto gains from overnight and hovered at high levels around 49,300 yuan/mt, closing up 0.8% on the day at 49,310 yuan/mt. The market focus shifted to the signing of a US-China Phase One trade deal that is scheduled on Wednesday. Eased concerns about US-Iran tensions also helped to support copper prices. The contract has breached the 40-day moving average with bullish positions loading up, which lifted open interest by 7,277 lots to 143,000 lots. The release of US consumer inflation data will be monitored tonight. 

Aluminium: The most-active SHFE 2003 contract extended its decline from the previous session as suspension of downstream production pre-holiday intensified pessimistic prospects for demand. The contract lost 0.54% on the day to end at 13,930 yuan/mt. The price gap between the SHFE January and February contracts narrowed to 470 yuan/mt by Tuesday’s close. SMM expects SHFE aluminium contracts to remain weak prior to the release of SMM primary aluminium social inventory data on Thursday. 

Zinc: The most-liquid SHFE 2003 contract fell for the fourth straight day on the back of subdued trades before the Chinese New Year holiday. With support from 18,000 yuan/mt, the contract finished at 18,185 yuan/mt, down 0.55% on the day. Technical indicators pointed to some further downward room in prices. Support from 18,000 yuan/mt will be watched. 

Nickel: The most-liquid SHFE 2003 contract failed to extend its six consecutive days of a price rally, with a drop of 3.19%, ending at 108,900 yuan/mt. Exiting long positions accounted for the slump, as open interest shrank 12,694 lots to 169,022 lots. The contract has lost support from the Bollinger middle band, with the KDJ indicators expanding downwards, suggesting further downside risk. Support from 108,000 yuan/mt will be monitored tonight. 

Lead: The decline in Shanghai lead slowed as purchases from lead-acid battery producers led to tight supply of primary lead, which eased bearish sentiment in the market. The most-traded SHFE 2003 contract fell 0.7% on the day to close at 14,905 yuan/mt. Expectations of weakness in pre-holiday demand could keep the contract under pressure. 

Tin: The most-traded SHFE 2006 contract closed higher on the day but it trimmed overnight increase, ending at 138,240 yuan/mt after hitting an intraday low of 137,550 yuan/mt. Support below is seen from 137,500 yuan/mt tonight.