SMM Morning Comments (Jan 17)

SHANGHAI, Jan 17 (SMM) –

Copper: Copper prices reversed earlier gains overnight, as the US dollar rebounded on a string of solid data on the US economy. Three-month LME copper eased off an 8-1/2-month peak of $6,343/mt, before closing the trading day 0.52% lower at $6,269/mt. The most active SHFE 2003 contract fell from a session-high of 49,550 yuan/mt to end 0.1% lower at 49,220 yuan/mt overnight. The People's Bank of China (PBOC) injected 300 billion yuan into the market on Thursday, to maintain liquidity in the banking system at a reasonably sufficient level before the Spring Festival. This is set to offer some support to copper prices. LME copper is expected to move between $6,250-6,300/mt today, with SHFE copper at 49,100-49,500 yuan/mt. Spot discounts are seen at 190-140 yuan/mt amid holiday-thinned trades and as futures prices are high.

Aluminium: Three-month LME aluminium climbed to a one-week high of $1,818/mt on Thursday, before it finished the trading day 0.5% firmer at $1,809/mt. A significant increase in SHFE aluminium helped lift LME aluminium, but a stronger US dollar is likely to keep gains in LME aluminium in check. LME aluminium is expected to hover at $1,790-1,820/mt today. The most traded SHFE 2003 contract held onto the massive gains from the previous session in overnight trading, and closed at 14,240 yuan/mt. Tight aluminium availability outweighed downstream consumption stagnation ahead of the Chinese New Year holiday, and underpinned prices. SHFE aluminium is likely to move at 14,100-14,400 yuan/mt today.

Zinc: Three-month LME zinc hit a two-month high of $2,432/mt on Thursday, before it eased to close the trading day 0.33% weaker at $2,399.5/mt. Resistance was stiff at the upper Bollinger band. Zinc inventories across LME warehouses continued to fall, decreasing 0.15% on the day to 51,575 mt. LME zinc is expected to trade between $2,370-2,420/mt today. The most active SHFE 2003 contract opened higher and climbed to a one-week high 18,465 yuan/mt in early trade overnight. It later weakened to close the session 0.69% higher at 18,355 yuan/mt. The SHFE 2003 contract is expected to trade at 18,000-18,400 yuan/mt today. Shanghai spot premiums for domestic 0# Shuangyan are seen at 150-190 yuan/mt over the SHFE 2002 contract. Shanghai spot premiums held firm thanks to stockpiling by some traders, while demand in other regions weakened and prices were in discounts.

Nickel: Nickel prices pulled back substantially overnight, as the greenback rose. Three-month LME nickel eased off four-week highs to $13,800/mt, down 3.77% on the day. Whether LME nickel could cling to the $13,800/mt level will come under scrutiny today. The most traded SHFE 2003 contract tumbled 2.92% in overnight trading to end at 107,890 yuan/mt. It has yet to move out of its recent range of 108,000-114,000 yuan/mt.

Lead: Three-month LME lead crept up to its strongest since November 14 at $2,038/mt on Thursday, before it gave back all those gains to end 1.07% weaker at $1,982.5/mt. This fall came after two days of gains, and may extend into the near term. Pressure is strong at the 60-day moving average. The most active SHFE 2003 contract tracked losses in its LME counterpart in overnight trading. It came off from a high of 15,405 yuan/mt to close 0.1% weaker at 15,210 yuan/mt. Tight availability in Chinese spot lead markets and optimism over the US-China trade deal contributed to recent gains in SHFE lead.

Tin: Three-month LME tin notched a six-month peak of $17,820/mt on Thursday, before it erased some gains to end the trading day 0.8% higher at 17,640/mt. Resistance is seen at $17,800/mt. The most traded SHFE 2006 contract fluctuated after a higher open overnight, and closed 0.54% higher at 140,630 yuan/mt. Resistance is seen at the 40-day moving average at 142,000 yuan/mt, while support is at the five-day moving average at 139,000 yuan/mt.