SMM Morning Comments (Jan 3)

SHANGHAI, Jan 3 (SMM) – 

Copper: Prices of copper were under downward pressure overnight as renewed safe-haven demand on downbeat manufacturing data from the eurozone and the UK buoyed the US dollar. There is little to suggest that prices will regain upward momentum today. Three-month LME copper is seen trading between $6,170-6,220/mt with the most-liquid SHFE 2003 contract at 48,850-49,250 yuan/mt. Spot offers are seen as high as a premium of 40 yuan/mt on the prospects for improved cash flows.  

Aluminium: Three-month LME aluminium fell to a two-week low of $1,786/mt before it trimmed some losses and finished at $1,800.5/mt, as investors covered their bullish position. The most-traded SHFE 2002 contract halted its four straight sessions of increase, ending lower at 14,000 yuan/mt. Weakened downstream demand after the New Year’s Day holiday dampened confidence in longs and weighed on prices. There is limited upward room expected for near-term aluminium prices. Today, the SHFE contract will likely trade at 13,900-14,100 yuan/mt with LME aluminum at $1,790-1,820/mt. 

Zinc: Three-month LME zinc recovered after two days of decline, climbing to a high of $2,313.5/mt and closed 1.34% higher on the day at $2,305.5/mt, supported by lower inventories. Zinc stocks across LME-listed warehouses shrank for the 18th consecutive day and hit the lowest level since November 11, to 51,200 mt on Thursday. The most-traded SHFE 2003 contract also increased, ending up 0.48% at 17,940 yuan/mt. Prices will be supported today by positive market sentiment after China unveiled plans to build at least 4,000 km of new railway lines this year. But the upsides in prices will be capped on expectations of sluggish orders across downstream sectors in January. Trading range is seen between 17,650-18,050 yuan/mt today with LME zinc hovering between $2,270-2,330/mt. 

Nickel: Three-month LME nickel regained losses from the prior session as it raced above $14,100/mt to close up 1.28% on the day at $14,240/mt. The most-traded SHFE contract tracked its LME counterpart higher, rising 0.58% and finishing at 111,700 yuan/mt. They both found resistance above from the 10-day moving averages. Today, the SHFE contract will likely test the 112,000 yuan/mt level and LME nickel may manage to hold firm above $14,200/mt. 

Lead: Three-month LME lead continued to soften as it slipped to a low of $1,896.5/mt and closed down 0.42% at $1,915/mt. The most-traded SHFE contract remained in a downward trend, ending 0.3% lower at 14,945 yuan/mt after hit a low of 14,900 yuan/mt. LME lead will face further downside risk with the SHFE contract likely testing support from 14,750 yuan/mt in the short term. 

Tin: Prices of tin rebounded in London and Shanghai overnight on the back of short-covering. Today, the most-traded SHFE 2005 contract is likely to trade with support from 135,000 yuan/mt and pressure from 137,000-137,300 yuan/mt, with three-month LME facing resistance from $17,200-17,300/mt.