SMM Morning Comments (Oct 16)

SHANGHAI, Oct 16 (SMM) –

Copper: LME copper closed near its day lows at $6,253/mt on Monday as longs booked profits after the contract climbed to an intraday high of $6,342/mt. With bearish sentiment from weakness in the equity markets, longs booked profits after the SHFE 1811 contract crept to a high of 50,960 yuan/mt and hovered around the daily moving average. This dragged the contract down to close at a low of 50,480 yuan/mt overnight. Pessimistic sentiment, triggered by the equity rout, lingered and this slowed the growth in copper prices. However, China's robust exports in September and low stocks across LME, COMEX and SHFE warehouses could provide some support. On technicals, LME copper touched the 10-day moving average and its Bollinger bands appeared to converge; SHFE copper stood firmly above the five-day moving average. We expect LME copper to trade at $6,190-6,280/mt today with the SHFE 1811 contract at 50,500-51,000 yuan/mt. Spot prices are seen at discounts of 20 yuan/mt to premiums of 30 yuan/mt.

Aluminium: With support at the five-day moving average, the SHFE 1812 contract recovered most losses after it fell to a new four-month low at 14,070 yuan/mt. It is likely to trade at 14,000-14,250 yuan/mt today with spot discounts of up to 40 yuan/mt. LME aluminium fluctuated to end Monday at $2,033/mt. It is likely to remain rangebound today with a trading range of $2,020-2,060/mt.

Zinc: LME zinc dropped significantly on Monday due to the weak performance of its SHFE counterpart. The five- and 10-day moving averages adhered to each other and this created some resistance on the contract. LME zinc is likely to trade under pressure today with a range of $2,580-2,630/mt. The SHFE 1811 contract fell and ended at 22,450 yuan/mt overnight after it rose to 22,640 yuan/mt. Pressure was seen at the five-day moving average as the KDJ lines expanded downwards. Gains in social stocks across Shanghai, Tianjin and Guangdong and the end of October deliveries are likely to keep the contract rangebound at 22,300-22,800 yuan/mt today.

Nickel: LME nickel tumbled to the $12,600/mt level in late trading and closed at $12,585/mt on Monday. The SHFE 1901 contract fell overnight and ended at 103,900 yuan/mt. Nickel prices are expected to remain rangebound as supply and demand both grow. LME nickel is likely to hover around $12,600/mt today. The SHFE 1901 contract is expected to trade at 103,500-105,000 yuan/mt with spot prices at 104,500-111,500 yuan/mt.

Lead: LME lead posted a six-day winning streak and notched a fresh six-week high at $2,116/mt on Monday. It came off from highs by close, suggesting a lack of upward momentum. We expect a limited correction for the contract in the short term. LME lead’s strong performance also prompted its SHFE counterpart to open higher overnight and initially climb to a high of 19,060 yuan/mt, the highest in three months. The SHFE 1811 contract, however, pared all those gains to end in the red as its LME counterpart retreated. We expect a correction for the contract in the short term.

Tin: LME tin continued its rangebound pattern between the five- and 60-day moving averages on Monday and closed at $19,160/mt. It is likely to remain rangebound in the near term with resistance at $19,300 yuan/mt and support at $18,800/mt. The SHFE 1901 contract consolidated around 147,200 yuan/mt overnight and ended at 147,290 yuan/mt. As market participants received limited cues from a stable LME tin, the SHFE 1901 contract is expected to remain rangebound in the short term with resistance at 148,000 yuan/mt and support at 146,000 yuan/mt.