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SMM Morning Comments (Feb 7): Copper stemmed its rally
Feb 7,2020 10:02CST
price review forecast
LME base metals, except for zinc and nickel, cruised higher on Thursday

SHANGHAI, Feb 7 (SMM) – Copper prices got off to a weak start on Friday, and the recent rally appeared to run out of steam with worries about the economic impact of the coronavirus epidemic lingering.

London copper registered a three-day winning streak overnight after it jumped to its highest in more than a week earlier in the session. LME base metals, except for zinc and nickel, cruised higher on the day.

SHFE base metals, except for lead, moved higher on Thursday. Copper added 1.4% to be the best performer, tin rose 1.2%, aluminium gained 0.4%, zinc advanced 0.2% and nickel edged up less than 0.1%. The SHFE has suspended night time trading until further notice.


Copper: Three-month LME copper eased after hitting a new more than one-week high of $5,813.5/mt in Asian trading hours, as concerns about demand lingered. It finished the trading day 0.37% higher at $5,742.5/mt. Copper consumption is set to decline significantly in February as the epidemic outbreak prompts processors to delay their resumption of operations. Seasonally growing inventories will keep copper price gains in check. LME copper is expected to move between $5,720-5,780/mt today, with SHFE copper at 45,700-46,100 yuan/mt. Spot prices are seen higher at a premium of a maximum of 30 yuan/mt, as recovering prices deter sellers from lowering their offers.


Aluminium: Three-month LME aluminium recovered earlier losses to a one-week high of $1,751/mt on Thursday before closing the trading day 0.9% higher at $1,740.5/mt, marking a three-day winning streak. It is expected to move at $1, 720-1,760/mt today. SHFE aluminium is likely to continue to hover at 13,500-13,800 yuan/mt today.


Zinc: Three-month LME zinc reversed earlier gains to an intraday low of $2,182/mt on Thursday, before it clawed back some losses to end the trading day 0.38% weaker at $2,214/mt. This came after two consecutive days of substantial gains, as data showed that zinc inventories across LME warehouses rebounded sharply from record lows to 52,950 mt. More deliveries to LME warehouses are expected as the ongoing epidemic outbreak dampens the outlook for near-term demand, which will limit upside in LME zinc prices. LME zinc is expected to trade between $2,180-2,230/mt today, with SHFE zinc at 17,100-17,500 yuan/mt. Spot premiums for domestic 0# Shuangyan are seen unchanged at 10-30 yuan/mt over the SHFE 2003 contract.


Nickel: Three-month LME nickel pulled back 0.83% on Thursday. It erased earlier gains end at $13,100/mt. It still stays between the five- and 20-day moving averages.


Lead: Three-month LME lead rebounded on Thursday. It climbed to an intraday high of $1,864/mt before closing the trading day 1.15% higher at $1,847/mt. LME lead remains at lows and has yet to figure out a direction.  


Tin: Three-month LME tin rose for a third straight day on Thursday, gaining 1.12% to end at $16,695/mt, its highest close in nearly two weeks. Resistance is seen at the 60-day moving average at $16,800/mt.

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