SMM Morning Comments (Jan 20)

SHANGHAI, Jan 20 (SMM) –

Copper: London copper prices retreated from eight-month highs on Friday night, tracking losses in oil prices that were caused by oversupply concerns. Three-month LME copper came off from an intraday high of $6,324/mt to close flat at $6,269/mt. The most active SHFE 2003 contract shed 0.55% in Friday night’s trading to end at 49,060 yuan/mt. Strong global economic data, the low interest rate environment and optimism from the signing of a US-China trade deal are expected to boost market sentiment and underpin copper prices this week. LME copper is expected to move between $6,250-6,300/mt today, with SHFE copper at 48,950-49,250 yuan/mt. Spot discounts are seen narrower at 80-20 yuan/mt, as sufficient cash will allow sellers to hold their offers firm with more traders away for the Chinese New Year holiday.

Aluminium: Three-month LME aluminium gave back earlier gains to close the trading day 0.19% lower at $1,805.5/mt on Friday. LME aluminium has yet to move out of its recent range and is expected to remain rangebound today, between $1,790-1,820/mt. The most traded SHFE 2003 contract lost 0.25% to 14,245 yuan/mt in Friday night’s trading. SHFE aluminium is staying at highs, but its upside potential this week will be limited by weakening consumption and rising inventories. It is likely to move at 14,200-14,350 yuan/mt today. Spot premiums are seen at 60-100 yuan/mt over the SHFE 2002 contract.

Zinc: Three-month LME zinc notched a new two-month high of $2,439.5/mt on Friday, before it closed the trading day 1.25% higher at $2,429.5/mt. It has regained support at the five-day moving average, but remains under the pressure from the upper Bollinger band. Zinc inventories across LME warehouses continued to fall, dipping 0.24% on the day to 51,450 mt. LME zinc is expected to trade between $2,400-2,450/mt today. The most active SHFE 2003 contract tracked gains in its LME counterpart on Friday night, recovering from earlier losses to close 0.14% firmer at 18,395 yuan/mt. Zinc demand in China is set to weaken further this week, as the Lunar New Year holiday will begin at the weekend. This will likely limit further upside room in SHFE zinc. The SHFE 2003 contract is expected to trade at 18,100-18,500 yuan/mt today. Spot premiums for domestic 0# Shuangyan are seen at 100-150 yuan/mt over the SHFE 2002 contract.

Nickel: Three-month LME nickel on Friday recouped some losses from a plunge on Thursday, gaining 0.98% on the day to end at $13,935/mt. However, its SHFE counterpart, the most traded March contract, extended the decline in Friday night’s trading, shedding 1.24% to end at 108,320 yuan/mt.

Lead: Three-month LME lead erased earlier gains to finish the trading day 0.13% weaker at $1,980/mt on Friday, suggesting strong sell-off pressure at highs. LME lead is expected to remain rangebound in the short run. The most active SHFE 2003 contract recovered from a lower open on Friday night, and ended a tad weaker at 15,250 yuan/mt. It is likely to hover around 15,200 yuan/mt today in holiday-lulled trading.

Tin: Three-month LME tin extended its gains to a near-six-month peak of $17,860/mt on Friday, before it eased to close the trading day 0.79% higher at $17,780/mt. The most traded SHFE 2006 contract inched up 0.11% to 140,650 yuan/mt on Friday night.