SMM Morning Comments (Oct 8)

SHANGHAI, Oct 8 (SMM) –

Copper: LME copper lost 0.67% to end at $6,186.5/mt on Friday. SHFE copper faces pressure from a strong US dollar and firm USeconomy. The recent US-Mexico-Canada Agreement will also put China’s exports under pressure. China’s central bank, however, provided some support. The reserve requirement ratios (RRRs) cut of 100 basis points announced on Sunday is set to bolster the stock market and grow anticipation of investment growth in infrastructure construction in the fourth quarter of the year. We expect LME copper to trade at $6,140-6,210/mt today with the SHFE 1811 contract at 49,000-50,100 yuan/mt. Spot premiums are seen at 20-70 yuan/mt as traders might clean up their stocks and downstream consumers would restock after the week-long break.

Aluminium: LME aluminium lost all its previous gains and settled at $2,105/mt last Friday night after Hydro said that it obtained a key tech permit for its alumina refinery Alunorte in Brazil and plans to restart operations. LME aluminium is also expected to face pressure from a strong US dollar on robust economic data. Its trading range is set at $2,080-2,140/mt today, with the SHFE 1811 contract trading at 14,200-14,500 yuan/mt. Spot offers are likely up to a maximum of 30 yuan/mt today.

Zinc: Last week, LME zinc came off after hitting a high of $2,728/mt with steady movements in the short-term moving average. We expect it to consolidate at $2,600-2,650/mt today. Gains in LME zinc may provide some support to its SHFE counterpart today after the nine-day closure of the Shanghai market. SHFE zinc is unlikely to fall in the short term given sufficient ore supplies and tight refined material supplies, but output during the break may also limit upward momentum in the futures. The SHFE 1811 contract is likely to trade at 21,850-22,350 yuan/mt.

Nickel: Last week, LME fell after it gained 3% on Wednesday with resistance at the 40-day moving average and support at $12,000/mt. Stocks across LME inventories continued to decline but on a smaller scale. We expect LME nickel to hover around $12,600/mt today with the SHFE 1811 contract trading at 103,500-105,000 yuan/mt. Spot prices are seen at 103,500-110,000 yuan/mt.

Lead: LME lead continued its weak performance last week and registered a three-day losing streak. Pressure remained at the moving averages. It is unlikely to strengthen in the near term without momentum. Market participants should monitor the $2,000/mt level.

Tin: LME tin held relatively steady last week and is expected to continue its rangebound pattern in the short term. For SHFE tin, resistance is seen at 150,000 yuan/mt for the 1901 contract.