SMM Morning Comments (Nov 22)

SHANGHAI, Nov 22 (SMM) – 

Copper: LME copper received support at the Bollinger middle band as it extended its increase of the daytime and mostly hovered above the daily moving average. It closed at $6,233/mt after rising to a high of $6,240/mt. With support at the five-day moving average, the SHFE 1901 contract settled at 49,530 yuan/mt with open interest up 2,704 lots to 518,000 lots. Market sentiment improved as the equity selloff eased. Development of China-US trade conflict will remain in focus in the near run. Today, the contract is expected to trade at 49,100-49,600 yuan/mt with its LME counterpart trading at $6,200-6,250/mt. Spot premiums are set at 50-120 yuan/mt as supplies are tight. 

Aluminium: Market talks about 10% production cuts in Liaocheng of Shandong province buoyed the SHFE 1901 contract to a high of 13,780 yuan/mt after opening of the night session. However, heavy pressure above at the 10-day moving average settled it at 13,755 yuan/mt, remaining above the five-day moving average. It is unlikely to break pressure at the 10-day moving average today, with trading range set at 13,700-13,800 yuan/mt. SMM will release social stocks data of primary aluminium today. LME aluminium increased above the five- and 10- day moving averages as the US dollar dipped. With resistance at the 20-day moving average, it will trade at $1,945-1,960/mt today. 

Zinc: As macro pessimism waned, fundamentals supported LME zinc to test pressure at the five-day moving average last night. It closed 1.28% higher at $2,574/mt. We expect it to continue to test resistance at the five- and 40- day moving averages today, trading at $2,540-2,590/mt. The SHFE 1901 contract rallied from lows around 21,000 yuan/mt as longs increased, and settled at 21,165 yuan/mt. However, slow consumption in winter and inflow of imports will cap the increase in prices in the short run. It is expected to trade at 20,950-21,400 yuan/m today. 

Nickel: Weak fundamentals grew confidence in short positions, which lowered LME nickel by 0.5% and the SHFE 1901 contract by 1.41% overnight. This was despite a softened US dollar. Limited upward momentum will see LME nickel hovering weakly around $11,000/mt, with the contract trading at 90,500-92,000 yuan/mt today. Spot prices are seen at 91,000-102,500 yuan/mt today. 

Lead: Rising longs pulled up LME lead above all moving averages to a high of $2,014.5/mt. Settling at $2,007/mt, it will struggle to stand firm at current level today. The SHFE 1901 contract hovered around the five-day moving average overnight. A higher LME lead buoyed longs’ confidence, which closed the contract 0.6% higher on the day at 18,320 yuan/mt. It will maintain the rangebound trend today. 

Tin: Both LME tin and the SHFE 1901 contract dipped as longs exited the market. LME fell to the lowest overnight at $19,250/mt, and will test support at $19,000/mt today. The SHFE 1901 contract lost support at the 150,000 yuan/mt level as it closed at 149,560 yuan/mt. Further downward room is expected today.