SMM Morning Comments (Jul 23)

SHANGHAI, Jul 23 (SMM) –

Copper: Copper prices gave back their gains overnight as longs covered positions on a solid US dollar as expectations for an aggressive easing from the Fed eased and as US economy continued to outperform other major economies. The firm greenback is likely to continue to weigh on copper prices today, who could find little support from fundamentals. The most active SHFE September contract lost 1.05% to close at 47,300 yuan/mt overnight. This, together with sharp losses on Monday has forced the contract to reverse most of gains registered last week. Technical indicators could not offer support, either. LME copper is expected to trade between $5,990-6,030/mt today, with SHFE copper at 46,950-47,400 yuan/mt. Spot prices are seen in a discount of 20 yuan/mt to a premium of 50 yuan/mt, and trades are likely to improve as prices of futures fell and as traders need to fulfill long-term contracts.

Aluminium: Three-month LME aluminium slipped 1.81% to close at $1,813.5/mt on Monday. The load-up of short positions primarily accounted for the losses. LME aluminium is expected to trade between $1,800-1,840/mt today. Shanghai longs aggressively trimmed their positions as soon as overnight trades began, shrinking over 2,000 lots in a minute. This pulled the most liquid SHFE September contract below all short-term moving averages to a low of 13,805 yuan/mt. The contract traded rangebound in the rest of trading hours and ended 0.61% lower at 13,825 yuan/mt. A rally in the US dollar and bearish fundamentals weighed on SHFE aluminium overnight, which fell for a second straight day. It is expected to trade between 13,760-13,860 yuan/mt today, with spot prices in a discount of 30 yuan/mt to a premium of 10 yuan/mt.

Zinc: Three-month LME zinc recovered from earlier losses to finish its Monday trading day 0.14% higher at $2,427.5/mt. It failed to break the 10-day moving average twice. LME zinc saw a wider contango structure, suggesting recovering supplies. This raised questions about how strong upward momentum in LME zinc is. The contract is expected to trade between $2,390-2,440/mt today. The most active SHFE September contract hovered around the five-day moving average to close 0.34% lower at 19,245 yuan/mt overnight. Downwards expanding KDJ lines and growing social inventories showed limited steam in SHFE zinc, which is expected to trade between 19,000-19,500 yuan/mt today.

Nickel: Three-month LME nickel extended its retreat on Monday, falling below the five-day moving average and losing 2.8% on the day to close at $14,240/mt. Whether it can remain above the $14,000/mt level is crucial to watch today. The most traded SHFE October contract opened lower overnight and traded around the daily moving average as low as 112,900 yuan/mt in a tight range. It ended 2.18% lower at 112,940 yuan/mt, below the five-day moving average. We will monitor whether it can hold onto its ground at 110,000 yuan/mt today.

Lead: Three-month LME lead continued its pullback and shed 1.91% to end at $2,008/mt on Monday. Support from the 20-day moving average will come under scrutiny in the short term. Weakening LME lead kept its SHFE counterpart from fully recovering from losses from a lower open overnight, and the most active September SHFE contract lost 0.9% to end at 16,470 yuan/mt. Longs are likely to exit Shanghai lead if prices extend their declines today.

Tin: Three-month LME tin rebounded to an intraday high of $18,000/mt on Monday before it pared some gains to finish the trading day 0.62% higher at $17,880/mt. Support is seen from a previous low of $17,500/mt. The most traded SHFE September contract traded rangebound to close 0.17% higher at 134,990 yuan/mt overnight. Support is seen at 132,000 yuan/mt while resistance is at 137,500 yuan/mt.