SMM Morning Comments (Aug 28)

SHANGHAI, Aug 28 (SMM) – 

Copper: A weaker US dollar and improved market sentiment are expected to continue to buoy copper prices in the short run. With support from fundamentals, the SHFE 1810 contract opened at highs of 48,850 yuan/mt. It closed at 48,710 yuan/mt overnight with a trading range forecasted at 48,600-49,000 yuan/mt today. A surging Chinese yuan is likely to drive LME copper to outperform the contract today. LME copper is seen trading at $6,075-6,130/mt today. We expect spot premiums to extend their decline to 20-80 yuan/mt as traders destocked. 

Aluminium: The SHFE 1810 contract rebounded as alumina jumped $42.5/mt to trade at $623/mt at India’s National Aluminium Company (Nalco). However, without support from its LME counterpart, the contract fell to a low of 14,735 yuan/mt and closed at 14,770 yuan/mt. Open interests lost 5,502 lots to 259,308 lots. It is likely to consolidate at 14,700-15,000 yuan/mt today with spot discounts at 80~40 yuan/mt. LME aluminium is likely to receive support from higher alumina prices, and to trade at $2,080-2,100/mt today. 

Zinc: The SHFE 1810 lacked upward momentum with pressure from rising shorts. An inflow of imported zinc and sluggish downstream consumption will further weigh on prices. It lost 150 yuan/mt from last Friday and closed at 21,155 yuan/mt overnight. The contract is likely to trade at 21,000-21,500 yuan/mt with LME copper trading at $2,500-2,550/mt today. 

Nickel: As shorts left and longs increased, the SHFE 1811 contract broke resistance at the 109,000 yuan/mt level overnight and closed at 108,880 yuan/mt. Current low inventories may continue to bolster prices, with support expected at the 108,000 yuan/mt level. The contract is likely to trade between 108,000-109,500 yuan/mt today, with LME nickel hovering around $13,300/mt. Spot prices are likely to stand at 108,000-110,500 yuan/mt. 

Lead: The SHFE 1810 contract regained initial losses and closed the overnight session 0.05% higher at 18,350 yuan/mt. Investors should monitor LME base metals for signs of strengthening after the US dollar fell below 95. This is likely to buoy their SHFE counterparts.

Tin: The SHFE 1901 contract extended its gains and settled at 146,270 yuan/mt overnight. We expect it to continue its strong and rangebound pattern in the short term with resistance at 147,000 yuan/mt. We expect LME tin to trade rangebound today with resistance at $19,400/mt.