SMM Morning Comments (Jun 14)

SHANGHAI, Jun 14 (SMM) –

Copper: Copper prices now struggle around the five-day moving average, as shorts remained cautious in entering the market and longs were keen to close out their positions amid labour negotiations at copper mines. We believe copper still face pressure but may find some support and consolidate at high levels. We expect LME copper to trade at $7,180-7,240/mt today with the SHFE 1808 contract at 53,400-54,000 yuan/mt. Spot discounts are seen at 60-10 yuan/mt.

Aluminium: The SHFE 1808 contract remained rangebound within a narrow range overnight after it hit a high of 14,750 yuan/mt, while its LME counterpart traded strongly. The SHFE 1808 contract is likely to trade at 14,500-14,800 yuan/mt today, and LME aluminium is expected to edge up with a trading range at $2,270-2,290/mt. Spot prices are seen at a discount of 20 yuan/mt to a premium of 20 yuan/mt.

Zinc: LME zinc failed to break the $3,220/mt level overnight. We see limited upward momentum given the strong resistance and the US interest rate hikes, however, we also see support at the five-day moving average. LME zinc is likely to consolidate at $3,175-3,225/mt today. The SHFE 1808 contract inched up slightly overnight. The intensive environmental protection initiatives weighed on fundamentals, while support is seen at the five-day moving average. We expect it to trade at 24,150-24,600 yuan/mt today.

Nickel: As the US dollar came off, LME nickel climbed up overnight. The SHFE 1809 contract also initially surged as longs added their positions. The contract then hovered around the 117,580 yuan/mt level. LME and China’s inventories continued to decline, while Chinese central government’s environmental reviews weighed on production of nickel pig iron (NPI). We expect LME nickel to trade rangebound at high levels today and the SHFE 1809 contract to trade at 114,500-116,500 yuan/mt. Spot prices are seen at 114,600-116,600 yuan/mt.

Lead: LME lead rebounded to a high of $2,508.5/mt overnight but met some pressure. It was depressed to close at $2,485/mt, with open interests rising 3,066 lots to 122,484 lots. We expect it to hover at $2,450-2,500/mt today. The SHFE 1807 contract was pushed up by LME lead to a high of 20,750 yuan/mt at the opening of the night session, but inched down to close at 20,475 yuan/mt with limited momentum due to an outflow of capital. The contract is expected to trade at 20,300-20,550 yuan/mt today with spot prices at 20,600-20,800 yuan/mt in Shanghai.

Tin: LME tin recovered part of the losses last night to close at $20,875/mt, after dipping to a low of $20,710/mt. The SHFE 1809 contract hovered at low levels around the 60-day moving average overnight after a slump during the previous day. We see the contract trading weakly in the short run as investors cut their long positions. Support will be at 146,000 yuan/mt.