SMM Morning Comments (Aug 29)

SHANGHAI, Aug 29 (SMM) – 

Copper: LME copper traded robustly overnight as it opened above the 20-day moving average and jumped to an intraday high of $6,167/mt. It is forecasted to test resistance at $6,200/mt as market sentiment on the macroeconomy improved. The SHFE 1810 contract hovered around 49,000 yuan/mt overnight and closed at 49,010 yuan/mt. With buoyance from other base metals contracts, it may test resistance at the 10-week moving average, or the 49,200 yuan/mt level, in the short term. Copper prices are likely to continue their robust trend in the short run, but there will be uncertainty in the medium- to long-term. 

Aluminium: Tight supplies and higher purchasing prices of alumina in the overseas market pulled up LME aluminium, which soared to an intraday high of $2,142/mt. It closed 2.35% higher from Monday at $2,133/mt, with open interests up 1,921 lots to 626,000 lots. The SHFE 1810 contract also strengthened, and closed at 14,955 yuan/mt after it rose to a high of 15,100 yuan/mt. In the following two months, prices may face pressure from above, given market concerns over a slow resumption of downstream demand. We expect the contract to trade at 14,850-15,050 yuan/mt today with LME aluminium at $2,110-2,130/mt. Spot discounts are seen at 80-40 yuan/mt. 

Zinc: LME zinc tested resistance at the 40-day moving average twice overnight but failed both times. It received support from the Bollinger middle band, and closed at $2,521/mt, down from Monday. As upbeat consumer confidence data allowed the US dollar to regain some losses, we expect the contract to face continued pressure above and to trade at $2,500-2,550/mt today. The SHFE 1810 contract also weakened to close 0.81% lower at 21,320 yuan/mt as shorts entered the market. However, we do not expect much downward room in the contract as inventories decline. It is likely to consolidate at 21,150-21,650 yuan/mt today. 

Nickel: Both LME nickel and SHFE 1811 contract surged overnight as the US dollar hovered at lows and as fundamentals provided support. LME nickel closed at $13,635/mt after it climbed to a high of $13,680/mt, with its stocks across LME warehouses down to 241,488 mt. As shorts left, the SHFE 1811 contract broke pressure at the 110,000 yuan/mt level and closed at 110,490 yuan/mt. We expect the contract to trade at 109,500-111,000 yuan/mt today with its LME counterpart hovering around $13,550/mt. Spot prices are set at 109,000-111,000 yuan/mt. 

Lead: LME lead closed Tuesday 0.12% lower at $2,076/mt after it surged to a high of $2,103/mt. It is likely to test the pressure at $2,100/mt in the short term. The SHFE 1810 contract regained some losses and closed overnight 0.46% lower at 18,265 yuan/mt after it fell to a low of 18,185 yuan/mt. The short-term rebound in SHFE lead prices is likely to end if the contract extends its decline today.

Tin: LME tin inched up to close at $19,085/mt, but failed to break its rangebound trend overnight. The SHFE 1901 contact fell after it rose to the 20-day moving average level, and closed at 146,160 yuan/mt. Support is set at 145,400 yuan/mt today, with resistance at 147,000 yuan/mt.