SMM Morning Comments (Jun 15)

SHANGHAI, Jun 15 (SMM) –

Copper: The surging US dollar weighed on base metals overnight. While delivery approaches and price spread between SHFE front-month contracts narrowed to 150 yuan/mt, spot discounts lingered amid a low season of consumption. Shorts have yet to significantly add to their positions while longs are now keen to close out their bets. Copper prices are likely to trade rangebound in the near term with LME copper testing support at the $7,100/mt level. We expect LME copper to trade at $7,110-7,170/mt today with the SHFE 1808 contract at 53,100-53,600 yuan/mt. Spot discounts are seen at 60-0 yuan/mt.

Aluminium: LME aluminium rebounded back to around the 20-day moving average after being dragged down by its SHFE counterpart to a low of $2,252/mt. However, it closed below the daily moving average at $2,252.5/mt. We see it trading at $2,240-2,270/mt with limited upward room given a stronger US dollar. The SHFE 1808 contract tumbled to a low of 14,490 yuan/mt last night with pressure from shorts. It is expected to trade at 14,500-14,700 yuan/mt with spot offers at a discount of 20 yuan/mt to a premium of 20 yuan/mt.

Zinc: As the US dollar surged, LME zinc plummeted to a low of $3,152.5/mt overnight. It then recovered some losses as longs added their positions at lows. LME zinc managed to stand firmly above the 10-day moving average and found support at the 60-day moving average. But it still failed to break the $3,220/mt level. We expect it to consolidate at $3,155-3,205/mt today. With its weakening LME counterpart, the SHFE 1808 contract broke the support at the 24,000 yuan/mt level to a low of 23,955 yuan/mt. We see limited downward room given support at the 20- and 60-day moving averages. However, resistance at the 10-day moving average is strong. We expect the contract to hover at 24,000-24,450 yuan/mt today.

Nickel: LME nickel consolidated around the daily moving average overnight with support after it touched a low of $15,105/mt. With its weak LME counterpart, the SHFE 1809 contract hovered around the daily moving average overnight. Market participants remained cautious as consumption of stainless steel is in low season and as China’s environmental probes are likely to affect stainless steel production. We expect LME nickel to trade weakly rangebound today with the SHFE 1809 contract at 113,800-115,600 yuan/mt. Spot prices are seen at 113,800-115,800 yuan/mt.

Lead: LME lead tumbled to a low of $2,449/mt and broke the support at the 20-day moving average overnight as the US dollar rose. We see downward trend for LME lead and expect it to test support at the 20-day moving average in the short term. The SHFE 1807 contract rebounded to the daily moving average overnight after touching a low of 20,150 yuan/mt. As the delivery approaches and the Dragon Boat Festival over the weekend, we expect the contract to consolidate at low levels today.

Tin: LME tin mostly hovered at the five- and 20-day moving averages last night, and inched down to close at $20,825/mt with pressure from a rising US dollar. It is likely to remain its weakly trend in the short term. The SHFE 1809 contract hovered at lows around the 40-day moving average overnight. Due to strengthened US dollar and quiet transaction in the domestic spot market, the contract will remain at low levels with support at 146,000 yuan/mt.