SMM Morning Comments (Oct 18)

SHANGHAI, Oct 18 (SMM) –

Copper: A weaker US dollar bolstered three-month LME copper to a high of $5,787.5/mt on Thursday, before the contract eased on renewed fears of an economic slowdown after a string of weak economic data out of the US. LME copper finished Thursday 0.48% higher at $5,749/mt. The most active SHFE 1912 contract edged up 0.06% to 46,660 yuan/mt overnight. Growth fears, together with concerns over possible risks to a new Brexit deal and an imminent end to a high consumption season in China, will keep copper prices in check. LME copper is expected to move between $5,730-5,790/mt, with SHFE copper at 46,500-46,900 yuan/mt. Spot premiums are seen lower at 60-90 yuan/mt, as traders are likely to hold from purchasing at the end of the week.

Aluminium: Three-month LME aluminium rebounded to a high of $1,733/mt on Thursday, before it eased to end marginally higher at $1,728.5/mt. LME aluminium will struggle to break strong resistance in the short term, and is expected to trade between $1,720-1,740/mt today. The most traded SHFE 1912 contract advanced 0.4% to end at a one-week high of 13,890 yuan/mt overnight. Recent gains sent SHFE aluminium above the five- and 10-day moving averages, but the contract has yet to surpass the middle Bollinger band. SHFE aluminium was boosted by SMM data showing that social inventories of primary aluminium in China dropped over 60,000 mt this week. The contract is expected to trade between 13,800-13,950 yuan/mt today, with spot premiums of 30-70 yuan/mt.  

Zinc: Three-month LME zinc on Thursday rose to a high of $2,450/mt, the highest since August, before trimming some gains to close the day 0.68% stronger at $2,434/mt. With technical indicators indicating persisting upward momentum, falling LME zinc inventories and a wider backwardation on LME zinc will also offer support to prices today. The contract is expected to rise today and move between $2,400-2,450/mt. The premium for LME cash zinc over the three-month contract widened to $31.5/mt. The most active SHFE 1912 contract clawed back earlier losses to close a tad lower at 18,825 yuan/mt overnight. Traders cut long positions overnight, suggesting a lack of confidence across the market. SHFE zinc has fallen below the middle Bollinger band, with a shortened MACD red bar and KDJ lines expanding downwards. The contract is expected to remain subdued today and trade between 18,500-19,000 yuan/mt. Spot premiums for 0# Shuangyan are seen at 100-130 yuan/mt over the SHFE 1911 contract.   

Nickel: Three-month LME nickel on Thursday slipped for a fifth straight day to the lowest since August 30 at $16,085/mt, before recovering some ground to close 1.04% lower at $16,220/mt. Support at $16,200/mt will be closely watched today. The most traded SHFE 1912 contract weakened 1.05% to 128,730 yuan/mt overnight. Whether it could hold onto the 128,000 yuan/mt handle will come under scrutiny today, with support at the 60-day moving average.

Lead: Three-month LME lead rose on Thursday for a third day in a row to a peak for this week at $2,189/mt, within kissing distance from a more than one-year high of $2,195/mt it notched last Friday. It gained 0.83% on the day and ended at $2,186/mt. Resistance at $2,200/mt will remain under scrutiny today. The most active SHFE 1911 contract followed its LME counterpart higher overnight, rising 0.5% to 17,135 yuan/mt. Open interest for the contract continue to expand, with a higher premium over later-dated contracts, growing risks of a short squeeze.

Tin: Three-month LME tin refreshed its highest in a month at $17,240/mt on Thursday, before it closed 1.36% higher at $17,105/mt. Resistance is seen at a previous high of $17,600/mt. The most traded SHFE 2001 contract also hit a new one-month high of 141,790 yuan/mt overnight, before it ended up 1.11% at 140,800 yuan/mt. SHFE tin will try to remain above 140,000 yuan/mt in the short term, with immediate resistance at 142,000 yuan/mt.