SMM Morning Comments (Oct 24)

SHANGHAI, Oct 24 (SMM) –

Copper: Unexpected drawdown in US crude oil inventories and intensified protests in top copper producer Chile boosted copper prices, as three-month LME copper closed 0.9% higher at $5,878.5/mt with the most-active SHFE December contract ending up 0.87% at 47,450 yuan/mt. The rally, however, may unlikely to continue today as the recent weak US economic data dimmed demand outlook and raised expectations of another interest rate cut when policymakers meet next week. Today, LME copper is seen trading between $5,850-5,900/mt, with the SHFE contract at 47,000-47,500 yuan/mt. Spot premiums may fall to 30-70 yuan/mt as elevated futures prices depress downstream purchases.  

Aluminium: Three-month LME aluminium climbed during the European trading hours, but a buildup of bearish positions prevented it from exceeding $1,733.5/mt, and ended it 0.44% higher on the day at $1,726.5/mt. The most-liquid SHFE December contract rose for the third straight day as it closed up 0.25% at 13,820 yuan/mt, remaining below the 20-day moving average. Support from 13,800 yuan/mt is likely to keep the contract between 13,750-13,900 yuan/mt today, with LME aluminium at $1,710-1,750/mt. 

Zinc: Three-month LME zinc shrugged off pressure from the five-day moving average and hit a high of $2,487.5/mt as LME zinc inventories shrank to their lowest in 20 years. It ended 0.51% higher on the day at $2,473/mt. However, expectations of nearby inventories buildup may cap the upside room in prices, which will hover between $2,440-2,490/mt today. The most-traded SHFE December contract gained 0.35% overnight to end at 18,865 yuan/mt, after three straight sessions of decline. With pressure from the Bollinger middle band, the contract may consolidate between 18,600-19,100 yuan/mt today. 

Nickel: The most-traded SHFE December contract rose overnight, tracking gains in LME nickel, buoyed by supply concerns amid falling inventories and following an accident at major nickel producer Nornickel’s mine in Siberia. The contract ended higher for the second day by 0.99% at 131,260 yuan/mt, with three-month LME nickel closing up 0.39% at $16,625/mt. Today, pressure above from 132,000 yuan/mt and $16,700/mt will be monitored, respectively. 

Lead: Three-month LME lead continued to trend upwards as a firm backwardation structure drove longs to enter, lifting prices to $2,225/mt before they ended 0.8% higher at $2,217/mt. It is expected to further test the $2,225/mt level today. The most-active SHFE December contract tracked it LME counterpart and moved higher to 16,735 yuan/mt, but domestic weak fundamentals failed to support the contract, which ended at 16,710 yuan/mt, up 0.27% on the day. The Bollinger lower band, or 16,584 yuan/mt will provide strong support today. 

Tin: Three-month LME tin trimmed gains from the previous two trading days as it hit a low of $16,540/mt overnight and closed $340/mt lower at $16,580/mt. The most-traded SHFE January 2020 contract also slipped to end lower at 137,700 yuan/mt, weighed by loaded-up shorts. Support below is seen from 137,000 yuan/mt today, with that for LME tin at $16,500/mt.