SMM Morning Comments (Jul 24)

SHANGHAI, Jul 24 (SMM) – 

Copper: LME copper closed at $6,128/mt as longs took profits and left after the price hit above $6,200/mt. The SHFE 1809 contract gained 210 yuan/mt from last Friday night to close at 49,080 yuan/mt amid improved market sentiment on China’s positive fiscal and monetary policies. The country’s central bank injected 502 billion yuan of cash into the banking system on Monday through loans to commercial banks. We expect LME copper to trade at $6,100-6,160/mt today with the SHFE 1809 contract at 48,900-49,400 yuan/mt. Spot offers are set at flat to a premium of 40 yuan/mt, while limited inflow of imported materials is expected. 

Aluminium: LME aluminium tested pressure at the 20-day moving average and touched a high of $2,081/mt given the prospect of sanctions against Rusal being lifted. It is likely to trade at $2,050-2,080/mt today. In addition to buoyance from the cost side, SHFE 1809 contract received further support from its strengthened LME counterpart and hit a high of 14,330 yuan/mt. However, it still lacks strong momentum to achieve consecutive gains. We see it trading at 14,200-14,350 yuan/mt today with spot discounts at 110-70 yuan/mt. 

Zinc: With resistance at the five- and 10- day moving averages, LME zinc dived to a low of $2,549/mt amid a sharp surge of inventory. It is expected to hover at $2,520-2,570/mt today. Overnight, the SHFE 1809 contract lost the gains during the previous trading day amid rising shorts, which led to over 23,000 lots of increase in open interests on Monday. The contract fell 260 yuan/mt to close at 21,215 yuan/mt, and we forecast it to trade at 21,000-21,500 yuan/mt today. 

Nickel: LME nickel traded weakly around the daily moving average during the European trading session as the US dollar strengthened and LME inventory increased by 1,452 mt to 260,718 mt. It tumbled to a low of $13,350/mt with open interests dipping 1,410 lots to 237,000 lots. However, its inventory remained at a four-year low, and we see it hovering at $13,500/mt today. The SHFE 1809 contract accelerated its decline and diverged gradually from its daily moving average, closing at 109,420 yuan/mt. Its trading range is set at 109,200-112,000 yuan/mt today with spot prices at 109,000-110,000 yuan/mt. 

Lead: LME lead came off after touching a high of $2,174.5/mt overnight. As it remained some distance away from its moving averages, the contract is likely to test support at the $2,100/mt level today. The SHFE 1809 contract followed the plunge in LME lead and fell to 18,430 yuan/mt before close.

Tin: LME tin consolidated within a narrow range overnight and is likely to remain rangebound today with support at the $19,000/mt level. The SHFE 1809 contract continued to edge down and we see limited upward momentum given its weak LME counterpart and a supply overhang in the Chinese market. We expect the contract to continue to weaken in the short term.