SMM Morning Comments (Jan 22)

SHANGHAI, Jan 22 (SMM) –

Copper: Copper prices extended their decline overnight as concerns about global economy renewed after the IMF trimmed its global growth forecasts. The outbreak of a deadly virus in China, US political turmoil and persisting Middle East tensions dented risk sentiment, and kept the US dollar at one-month highs. Three-month LME copper plunged 1.88% on the day to end at a two-week low of $6,145.5/mt. The most active SHFE 2003 contract erased earlier gains to close down 0.29% at 48,490 yuan/mt in overnight trading session. Copper prices are likely to see some stabilisation today after massive losses in the previous sessions. LME copper is expected to move between $6,120-6,180/mt today, with SHFE copper at 48,300-48,800 yuan/mt. Spot discounts are seen at 60-20 yuan/mt in holiday-lulled trading.

Aluminium: Three-month LME aluminium recovered from earlier losses to end at its highest in more than a week at $1,827/mt, up 0.55% on the day. It is expected to remain rangebound and trade between $1, 800-1,830/mt today. The most traded SHFE 2003 contract weakened 0.25% to 14,135 yuan/mt in overnight trading, as consumption was muted ahead of the Chinese New Year holiday. It is likely to remain weak and move at 14,000-14,200 yuan/mt today. Spot discounts are seen at 120-80 yuan/mt against the SHFE 2002 contract.

Zinc: Three-month LME zinc reversed an earlier slip to hit a new two-month peak of $2,458/mt on Tuesday, before it closed the trading day 0.55% higher at $2,452.5/mt. Falling inventories helped LME zinc buck the downtrend across nonferrous metals. Zinc inventories across LME warehouses declined 0.44% on the day to 50,900 mt. LME zinc is expected to trade between $2,420-2,470/mt today. The most active SHFE 2003 contract edged down 0.11% in overnight trading to end at 18,265 yuan/mt. The outbreak of the new virus sparked concerns about production recovery after the Chinese New Year holiday, which will weigh on SHFE zinc prices. The SHFE 2003 contract is expected to trade at 18,100-18,400 yuan/mt today. Spot premiums for domestic 0# Shuangyan are seen at 100-120 yuan/mt over the SHFE 2002 contract.

Nickel: Three-month LME nickel dropped 2.46% on the trading day to end at $13,670/mt, its lowest close in six weeks. LME nickel faces stiff resistance at $14,100/mt. The most traded SHFE 2003 contract shed 1.1% to 107,570 yan/mt in overnight trading. Resistance is strong at a confluence of several moving averages.

Lead: Three-month LME lead followed its SHFE counterpart lower in Asian trading hours, touching a one-week low of $1,938/mt, before it recovered some ground in European trading. It finished the trading day 0.15% lower at $1,960.5/mt, registering a four-day losing streak. The most active SHFE 2003 contract hovered around 15,180 yuan/mt overnight, and closed down 0.72% at 15,185 yuan/mt. SHFE lead stabilised after a massive decline in the previous session. It is expected to move sideways ahead of the Chinese New Year holiday.

Tin: Three-month LME tin climbed to a new six-month peak of $17,900/mt on Tuesday, before it eased to end down 1.4% at 17,595/mt, pausing a rally that began more than two weeks ago. Support is seen at $17,500/mt. The unwinding of short positions helped the most traded SHFE 2006 contract recover somewhat from initial losses overnight, and the contract ended the session down 0.48% at 139,550 yuan/mt. Resistance lies at 140,000 yuan/mt.