SMM Morning Comments (Aug 9)

SHANGHAI, Aug 9 (SMM) –

Copper: LME copper edged up and closed at $6,172/mt on Wednesday. While it failed to climb above the 20-day moving average during the day, strong support is seen at $6,000/mt. The SHFE 1810 contract came off after an initial increase and closed at 49,450 yuan/mt overnight. Pressure was felt at the 10-day moving average. Tariffs on copper scrap imports from the US are likely to weigh on the supply in the Chinese market. We expect copper prices to strengthen in the short term. LME copper is likely to trade at $6,150-6,200/mt today with the SHFE 1810 contract at 49,300-49,800 yuan/mt. Spot premiums are seen at 30-80 yuan/mt.

Aluminium: LME aluminium surged and closed at $2,116.5/mt on Wednesday. The SHFE 1810 contract also jumped past all the moving averages overnight, hitting a high of 14,830 yuan/mt and settling at 14,795 yuan/mt. The market was buoyed by industrial action at Alcoa’s Pinjarra alumina refinery in Western Australia. Workers on Wednesday walked off the job indefinitely after they failed to settle a new enterprise agreement with the company. LME aluminium is likely to trade at $2,110-2,160/mt today and the SHFE 1810 contract is likely to trade at 14,700-15,000 yuan/mt. Spot discounts are seen at 50-10 yuan/mt.

Zinc: LME zinc inched up on Wednesday as the dollar index slipped and as LME inventory shrank. We expect it to trade rangebound at $2,580-2,630/mt and test the resistance at the middle Bollinger band amid renewed US-China trade disputes. The SHFE 1810 contract climbed past the upper Bollinger band overnight but met strong resistance at the 40-day moving average. A slowdown in destocking and growing inventories across Shanghai, Tianjin and Guangdong are likely to suppress the upward momentum for the contract. We expect it to trade at 21,300-21,800 yuan/mt today.

Nickel: On weakened US dollar, LME nickel climbed up gradually with support at the daily moving average. It increased 1.2% from Tuesday to close at $14,040/mt with inventory down 918 mt to 250,548 mt. The SHFE 1811 contract also gained 0.73% on high downstream demand and falling stock across SHFE warehouses. We expect the contract to hover at 114,500-115,500 yuan/mt today with LME nickel trading robustly around $14,000/mt. Spot prices are set at 114,000-116,500 yuan/mt.

Lead: LME lead was pushed up by its strengthened SHFE counterpart to a high of $2,156/mt. However, it failed to break its weakly rangebound trend amid continued market worries over the China-US trade dispute. The SHFE 1809 contract dipped after rising to a high of 18,565 yuan/mt as shorts exited. With support at the 10-day moving average, the contract gained 100 yuan/mt from Tuesday to close at 18,395 yuan/mt. Limited upward room is seen in both LME and SHFE lead in the short run, given intensified trade tensions.

Tin: Both LME tin and SHFE 1809 contract dipped overnight amid escalated trade tensions between China and the US. They are likely to trade with lingered pressure today. Support for LME tin is set at $19,200/mt, with that for the 1809 contract at 145,000 yuan/mt.