SMM Morning Comments (Oct 28)

SHANGHAI, Oct 28 (SMM) – 

Copper: Both three-month LME copper and the most-traded SHFE December contract moved higher last Friday night after unexpected lower crude oil stockpiles and potential further production cut by OPEC lifted oil prices, but the gains in copper were capped by dimmed demand outlook on the back of disappointing data from China’s industrial firms. LME copper retreated after rose to a high of $5,935/mt, ending up 0.4% at $5,907.5/mt, with the SHFE contract gaining 0.15% to close 47,460 yuan/mt. Prices are poised for possible decline today with LME copper trading between $5,870-5,920/mt and SHFE copper at 47,100-47,600 yuan/mt. Destocking inclination may weigh spot copper offers down to a discount of 30 yuan/mt. 

Aluminium: Three-month LME aluminium outperformed most of the other base metals as it closed at the highest level last Friday night at $1,734/mt, up 0.99% on the day. The most-liquid SHFE December contract also climbed on short-covering, ending higher at 13,850 yuan/mt. Trading range today is expected at 13,750-13,850 yuan/mt with that for LME aluminium at $1,705-1,740/mt. 

Zinc: Three-month LME zinc gained for the third straight session with support below from all moving averages as LME zinc inventories continued to fall and hit record lows. It finished 0.7% higher last Friday night at $2,514.5/mt, with intensified backwardations, indicating further upward momentum in prices today. The most-traded SHFE December contract tracked its LME counterpart to hit a high of 19,165 yuan/mt, but pressure from the Bollinger upper band ended it at 18,980 yuan/mt, up 1.63% on the day, reversing decline from the previous session. A buildup in domestic social inventories of refined zinc last week and expectations of a slack season will see the contract underperforming LME zinc, trading between 18,700-19,200 yuan/mt today, with LME zinc between $2,470-2,520/mt. 

Nickel: Three-month LME nickel consolidated within a broad range with a high of $16,930/mt, finishing slightly lower on the day at $16,850/mt. It is expected to continue to trade rangebound around $16,800/mt today. The most-active SHFE December contract did not extend decline from the prior session as it gained support from 132,000 yuan/mt and stemmed decline at 132,400 yuan/mt, closing 0.03% higher on the day at 133,380 yuan/mt. Resistance from the 20-day moving average will be monitored today. 

Lead: Increase in three-month LME lead slowed as pressure from $2,250/mt prevented prices from exceeding $2,246/mt, before they ended 0.29% lower on the day at $2,217/mt. The most-traded SHFE December contract unsuccessfully tested the 10-day moving average and pares some gains to close at 16,745 yuan/mt, up 0.27% on the day. A firm backwardation may provide upward momentum in LME lead but pressure above from moving averages is expected to restrain any increase in SHFE lead today. 
 
Tin: Three-month LME tin regained part of the losses after a stronger US dollar sent it to a low of $16,620/mt. It closed down $120/mt on the day at $16,675/mt, with support below expected from $16,600/mt today. The most-traded SHFE January 2020 contract jumped to a high of 138,730 yuan/mt and ended 380 yuan/mt higher at 138,580 yuan/mt, with longs adding their position. Support below is seen from 137,300 yuan/mt with pressure above from 140,000 yuan/mt today.