SMM Morning Comments (Jun 21)

SHANGHAI, Jun 21 (SMM) –

Copper: An increase of 14,000 mt in LME inventory suppressed LME copper to a low of $6,774/mt overnight after it hit a high of $6,867/mt. It rebounded slightly to the $6,800/mt level before it closed. The SHFE 1808 contract touched a low of 51,470 yuan/mt but found support at the 60-day moving average and closed at 51,680 yuan/mt. LME copper sees support at the $6,800/mt level and the SHFE 1808 contract sees support at 51,500 yuan/mt. In the physical market, downstream consumers were keen to restock as copper prices fell. Spot discounts are seen slightly narrower at 150-100 yuan/mt.

Aluminium: LME aluminium failed to receive support at $2,177/mt last night and touched a low of $2,165/mt as the US dollar gained. It is likely to face pressure from a potential trade conflict as the European Union plans to impose a 25% tariff on roughly €2.8 billion ($3.3 billion) worth of American goods. Its trading range is expected at $2,160-2,185/mt today. The SHFE 1808 contract traded weakly overnight with pressure from shorts. It closed at 14,130 yuan/mt after it fell to a low of 14,120 yuan/mt. We see it trading at 14,040-14,200 yuan/mt today with spot discounts at 60-20 yuan/mt.

Zinc: LME zinc consolidated under the daily moving average overnight after touching a low of $2,981/mt. While we see limited downward room, a strong US dollar would also cap upward momentum. LME zinc is likely to consolidate at $2,980-3,030/mt today. The SHFE 1808 contract rebounded overnight after it fell to a low of 23,200 yuan/mt. The trading level of the contract edged down slightly but found support at the lower Bollinger band. However, declining zinc prices failed to fuel the buying interest of downstream consumers in the low season. Inventories extended their growth. The SHFE 1808 contract is likely to consolidate at 23,150-23,650 yuan/mt today.

Nickel: LME nickel climbed overnight after coming off from $15,030/mt under pressure at the five-day moving average. SHFE nickel also gained some support from shrinking inventories in China as well as the closed import arbitrage window. The 1809 contract climbed to a high of 114,880 yuan/mt but met pressure at the 10-day moving average and hovered around the daily moving average. Overall performance of LME and SHFE nickel overnight remained relatively weak, suppressed by the stronger US dollar amid bearish sentiment. We expect LME nickel to trade rangebound today with the SHFE 1809 contract at 113,000-114,800 yuan/mt. Spot prices are seen at 113,000-115,000 yuan/mt.

Lead: LME lead broke the support at $2,400/mt and dipped to a low of $2,395.5/mt on a stronger US dollar and an increase of 1,000 mt in LME inventory. It tested support at $2,400/mt several times in recent days. We expect it to hover around that level today. The SHFE 1807 contract mostly traded around the daily moving average overnight and closed at 19,975 yuan/mt. Open interests registered a first increase in nearly nine trading days by 206 lots to 55,958 lots. Support is seen at 19,900-20,000 yuan/mt in the short term.

Tin: LME tin rose overnight and stood above the five-day moving average at one point but remained under pressure at closing. We see resistance at the $20,800/mt level for LME tin. The trading level of the SHFE 1809 contract nudged up overnight but remained under pressure at the five-day moving average. Corrections are seen for the contract after consecutive declines. Resistance is at the 148,000 yuan/mt level for the contract.