SMM Morning Comments (Feb 6): Copper on track for a third day of gains

SHANGHAI, Feb 6 (SMM) – Copper prices strengthened in early morning trade on Thursday, on track for a third straight day of gains, as investor sentiment has improved on strong US monthly private jobs data and reports of progress in developing a treatment to fight the fast-spreading coronavirus, as well as higher oil prices.

On Wednesday, London copper hit a one-week peak, as base metals traded broadly higher. Their counterparts on the Shanghai market also moved mostly higher on the trading day which was shortened as night time trading across China’s futures markets has been suspended from Monday until further notice.

SHFE nickel jumped 1.4% to be the best performer, copper rose 1.1%, aluminium gained 0.3%, while tin closed flat. Zinc edged down 0.1% and lead fell 1.1%. The recovery in metals was in line with the stock markets.

Copper: Three-month LME copper climbed to its highest since January 27 at $5,769/mt on Wednesday, before it erased some gains to end the trading day 1.54% higher at $5,721.5/mt, marking a two-day winning streak. LME copper is expected to move between $5,720-5,780/mt today, with SHFE copper at 45,500-46,000 yuan/mt. Spot prices are seen barely changed at a discount of up to 20 yuan/mt to a premium of a maximum of 20 yuan/mt, as sellers are unwilling to lower their offers ahead of the February delivery.

Aluminium: Three-month LME aluminium rallied to an intraday high of $1,728/mt on Wednesday before closing the trading day 1.53% higher at $1,725/mt. Reports of production cuts at Rio Tinto’s Tomago aluminium smelter in Australia and Chinese steps to offset the damage to economic growth and demand from the coronavirus, buoyed aluminium prices. LME aluminium is expected to hover at $1, 700-1,740/mt today. SHFE aluminium is likely to move at 13,500-13,800 yuan/mt today.

Zinc: Three-month LME zinc rose to an intraday high of $2,239/mt on Wednesday, before closing the trading day 1.83% stronger at $2,222.5/mt. Support lies at the five-day moving average, while pressure is seen at the 10-day moving average. Zinc inventories across LME warehouses were unchanged at a record low of 49,625 mt. LME zinc is expected to trade between $2,190-2,240/mt today, with SHFE zinc at 17,200-17,600 yuan/mt. Spot premiums for domestic 0# Shuangyan are seen lower at 10-30 yuan/mt over the SHFE 2003 contract.

Nickel: Three-month LME nickel strengthened 2.01% on the trading day to end at $13,210/mt. It has stood above the 10-day moving average, with the five- and 10-day ones converging to create strong support. Whether LME nickel could extend its gains to the 20-day moving average will come under scrutiny today.

Lead: Three-month LME lead bucked the uptrend across base metals on Wednesday. It relinquished earlier gains to close the trading day 0.76% lower at $1,826/mt. 

Tin: Three-month LME tin clawed back earlier losses to its highest in more than a week at $16,565/mt on Wednesday, before ending the trading day 1.44% firmer at $16,510/mt. Wednesday’s gain took LME tin to the 10-day moving average. It is now supported by the five-day moving average, but faces resistance at $16,700/mt.