SMM Morning Comments (Aug 30)

SHANGHAI, Aug 30 (SMM) –

Copper: While most base metals stopped or slowed their declines as risk aversion eased, the market expects to see limited upward momentum. LME copper traded between the 10- and 40-day moving averages overnight, and the SHFE 1810 contract inched down to close at 48,800 yuan/mt. Spot premiums are expected to lower to 50-100 yuan/mt as downstream consumers hesitated on higher offers. 

Aluminium: Short supplies of alumina overseas provided more support to LME aluminium than to SHFE aluminium. We expect LME aluminium to trade at $2,150-2,185/mt today. China’s social inventory of aluminium grew on greater arrivals, and this augmented market concern of lower-than-expected consumption in the high season. However, a robust LME aluminium may provide some support. The SHFE 1810 contract is likely to trade at 14,900-15,100 yuan/mt with spot discounts at 90-50 yuan/mt today.

Zinc: LME zinc inched down to close at $2,515/mt, while the 20- and five-day moving averages are expected to continue to provide support. Shrinking LME zinc inventories will also bolster prices. As investors added their longs, the SHFE 1810 contract surged to a high of 21,365 yuan/mt and closed at that level. Open interests grew 7,874 lots to 226,000 lots. In light of domestic low inventories, we see the contract trading at 21,150-21,650 yuan/mt, with its LME counterpart at $2,490-2,540/mt today. 

Nickel: LME nickel extended its losses during the European trading period and closed Wednesday at $13,450/mt. The SHFE 1811 contract came off to a low of 109,520 yuan/mt after it initially jumped past 110,000 yuan/mt. It then rebounded to its daily moving average and ended overnight at 109,920 yuan/mt. We expect nickel prices to trade rangebound with LME nickel hovering around $13,450/mt today. The SHFE 1811 contract is likely to trade at 109,000-110,500 yuan/mt today with spot prices at 109,000-112,000 yuan/mt.

Lead: While LME lead rose on Wednesday, it again failed to stand firmly above $2,100/mt. Longs and shorts are likely to struggle with each other around that level in the short term. The SHFE 1810 contract initially climbed to a high of 18,395 yuan/mt before it fell to the 18,300 yuan/mt level. It then rebounded and settled overnight 0.55% higher at 18,360 yuan/mt. 

Tin: LME tin failed to reverse its weak trend despite a weaker US dollar. As longs exited, it dipped to a low of $18,890/mt and closed $165/mt lower from Tuesday at $18,920/mt. Support below is set at $18,600/mt. The SHFE 1901 contract hovered weakly between the five- and 10-day moving averages with little support from its LME counterpart. The 143,000 yuan/mt level below will provide some support in the short run.