SMM Morning Comments (Feb 27)

SHANGHAI, Feb 27 (SMM) –

Copper: The three-month LME copper fell in volatile trading on Tuesday, closing at $6,467.5/mt. The most traded SHFE April contract fluctuated and closed marginally higher at 50,210 yuan/mt overnight. While shorts turned more active as the market digested the US-China trade optimism, supply concerns domestically and overseas are expected to support copper prices rangebound at highs in the short term. The KDJ lines of SHFE copper shaped a death cross, which is likely to weigh on prices today. LME copper is expected to trade at $6,425-6,500/mt with SHFE copper at 49,900-50,400 yuan/mt. Spot discounts are seen at 200-80 yuan/mt.

Aluminium: The three-month LME aluminium rebounded from a session low of $1,891/mt to finish Tuesday 0.7% higher at $1,917/mt. The unwinding of short positions accounted for the majority of Tuesday gains in LME aluminium. LME aluminium is expected to trade at $1,900-1,920/mt today. The most active SHFE May aluminium contract hovered around the five-day moving average and closed lower at 13,690 yuan/mt overnight. It is expected to trade 13,650-13,800 yuan/mt today with spot discounts at 90-50 yuan/mt against the SHFE 1903 contract.

Zinc: Low LME zinc inventories and extended losses in the greenback buoyed the three-month LME zinc to a three-week high of $2,747/mt on Tuesday, before the contract finished the trading day up 1.2% at $2,743/mt. LME zinc inventories are near record lows. This, together with supply issues overseas, lowered the possibility of a sharp decline in LME zinc, which is expected to stay at highs today with a trading range of $2,710-2,760/mt. As a strong LME zinc drove investors in Shanghai to load up long positions, the most traded SHFE April zinc contract climbed to end at 21,855 yuan/mt overnight. SHFE zinc underperformed its LME counterpart and remained within it recent trading range as seasonal supply pressure in China sustained. With limited upward momentum, the SHFE 1904 contract is expected to trade at 21,650-22,000 yuan/mt today.

Nickel: The three-month LME nickel fell to a session low of $12,850/mt in early trade on Tuesday. It lost 0.3% to finish the trading day at $12,935/mt. Supported by a decline in the US dollar, the most liquid SHFE May contract recovered from earlier losses overnight, ending at 101,820 yuan/mt. LME nickel is expected to trade rangebound at $12,900-13,200/mt today. SHFE nickel is likely to trade at 101,500-102,500 yuan/mt with spot prices at 101,500-103,000 yuan/mt.

Lead: Weakness in the US dollar bolstered the three-month LME lead on Tuesday, which ended the trading day 0.6% higher at $2,093.5/mt. Recent gains have helped LME lead stand above the 20-day moving average. It would likely try to break through $2,100/mt in the near term if trading volumes expand. The most active SHFE April lead contract rose to a high of 17,200 yuan/mt in early trade overnight, before it pared some gains to end at 17,105 yuan/mt. With shorts jumping in, support at 17,000 yuan/mt would be tested in the short run.

Tin: The three-month LME tin dropped to a session low of $21,445/mt on Tuesday before it erased some losses to end at $21,615/mt. Despite low LME tin inventories, LME tin faces the potential for a decline after consecutive gains, with support at $21,200/mt. The liquidation of long positions and losses in its LME counterpart weighed on the most liquid SHFE May tin contract overnight, which weakened to close at 150,690 yuan/mt. As longs take profits, SHFE tin is likely to fall with support at 150,000 yuan/mt.