SMM Morning Comments (Oct 10)

SHANGHAI, Oct 10 (SMM) –

Copper: LME copper rebounded above the daily moving average to a high of $6,303.5/mt and settled at $6,295/mt on Tuesday after the dollar dipped when US bond yields fell. On the technical front, LME copper managed to stand firmly above the five- and 10-day moving averages and approached the upper Bollinger band. Its MACD red line extended, reflecting the strength of longs. The SHFE 1811 contract soared to a high of 51,140 yuan/mt after it hovered at the daily moving average overnight. Its technicals stood above the five-day moving average and hit the upper Bollinger band at one point. LME copper is likely to trade at $6,260-6,340/mt today; the SHFE 1811 contract is expected to trade at 50,300-50,940 yuan/mt. In the physical market, high prices grew cautious sentiment among downstream consumers while sellers were keen to cash in their cargoes. Spot discounts of up to 70 yuan/mt are likely today.

Aluminium: While LME aluminium recovered some losses after it fell to a week-low of $2,031/mt, it registered a four-day losing streak on Tuesday on the dollar's strength and alumina supply concerns. It is expected to trade at $2,040-2,080/mt today. While the SHFE 1811 contract opened in negative territory overnight, it climbed into positive territory and notched a three-day winning streak. This helped it to stand firmly above the five-day moving averages and pulled up the weekly KDJ lines. The contract is likely to trade at 14,500-14,650 yuan/mt today with spot discounts at 50-20 yuan/mt.

Zinc: LME zinc performed strongly and stood robustly at the 10-day moving average, with strong resistance at $2,700/mt. We expect it to trade rangebound at $2,660-2,710/mt today. Its SHFE counterpart, the 1811 contract, also climbed overnight as longs aggressively added their positions. Pressure remained at 23,000 yuan/mt, and we expect the contract to trade at 22,700-23,200 yuan/mt.

Nickel: LME nickel surged past the 40-day moving average to a high of $13,020/mt in the later trading hours on Tuesday and closed at $12,970/mt. The SHFE 1811 contract also performed strongly overnight. It jumped past 107,000 yuan/mt to the highest since September and ended at 106,950 yuan/mt. The metal was voted as the most promising base metal for 2019 at this year's LME week in London, which might account for the recent increases in prices of futures. We expect LME nickel to hover at $12,800/mt today with the SHFE 1811 contract trading at 105,500-107,500 yuan/mt. Spot prices are seen at 105,000-112,000 yuan/mt.

Lead: As LME inventories grew some 2,000-mt, lead prices in London fell to $1,928/mt on Tuesday, near the lowest in close to two years. LME lead has closed lower for five consecutive trading days and is likely to test $1,900/mt, a psychologically-stable level, today. We see a trading range of $1,910-1,960/mt for it today. The SHFE 1811 contract opened in the red overnight, dragged by its weak LME counterpart, before it fluctuated to end at 18,115 yuan/mt. Support remained at 18,100 yuan/mt. It is expected to trade at 18,080-18,200 yuan/mt today with spot prices at 18,300-18,350 yuan/mt in Shanghai.

Tin: LME tin remained rangebound within a narrow range on Tuesday and is expected to continue such a trading pattern today. The SHFE 1901 contract hovered between the five- and 10-day moving averages before it edged up to close at 147,310 yuan/mt. It is likely to remain rangebound in the short term with some support from domestic fundamentals and macroeconomic uncertainties. Support is seen at 146,500 yuan/mt.