SMM Morning Comments (Jun 22)

Published: Jun 22, 2018 10:09 (GMT+8)

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SMM Morning Comments

SHANGHAI, Jun 22 (SMM) –

Copper: LME copper moved around the daily moving average overnight with firm support at the $6,800/mt level, while the SHFE 1808 contract came off after hitting 51,880 yuan/mt. We see strong support for both LME and SHFE copper prices in the short term from the technical point of view, but copper supply in China has increased sharply amid sluggish demand plagued by higher borrowing costs. Spot discounts are seen at 160-100 yuan/mt.

Aluminium: As the US dollar slipped, LME aluminium rebounded to a high of $2,193/mt from a session-low of $2,162.5/mt overnight. We see pressure at the five-day moving average and support at the $2,160/mt level. LME aluminium is likely to trade rangebound at $2,165-2,196/mt today. As longs added their positions, the SHFE 1808 contract hit a high of 14,265 yuan/mt last night after touching a low of 14,165 yuan/mt. However, the contract fell and hovered around the daily moving average as longs’ confidence proved to be limited. On fundamentals, inventory destocking continued and costs extended declines. The 1808 contract is likely to test support at the five-day moving average today with a trading range at 14,150-14,300 yuan/mt. Spot discounts are seen at 60-20 yuan/mt.

Zinc: Shorts dragged LME zinc to a 10-month low overnight before it regained some losses. We see strong resistance at the lower Bollinger band and support at the $2,900/mt level. LME zinc is likely to consolidate at $2,900-2,950/mt today. Suppressed by shorts, the SHFE 1808 contract broke the previous low of 22,930 yuan/mt to 22,865 yuan/mt last night. It then rebounded to the 22,980 yuan/mt level. The short momentum was strong as daily moving average expanded downwards but risks of shorts taking profits increased. The 1808 contract is likely to trade at 22,700-23,150 yuan/mt today.

Nickel: Both LME nickel and the SHFE 1809 contract inched up due to declining inventory and falling domestic nickel pig iron output on environmental cuts. LME nickel returned back to the daily moving average overnight and closed at $15,075/mt as the US dollar edged down below 95. LME nickel is expected to hover at highs today. The SHFE 1809 contract mostly traded rangebound at the daily moving average during last night, and we see it hovering at 114,600-116,300 yuan/mt today. Spot prices are expected at 114,400-116,400 yuan/mt.

Lead: As market jitters lingered, LME lead fluctuated overnight and plummeted to a low of $2,365/mt at one point. Market participants were keen to take a watch-and-wait stance given the simmering global trade wars. The SHFE 1807 contract rebounded after it weakened to a low of 19,610 yuan/mt. Consecutive declines in SHFE lead prices significantly hit longs’ confidence and these investors were keen to leave when they could. If the contract extended its declines, market participants should watch out for an exodus of investors.

Tin: LME tin traded weakly overnight and dipped to a low of $20,415/mt. Without obvious support, it lost $110/mt from Wednesday night to close at $20,475/mt. We expect it to consolidate at current levels with support at $20,300/mt. The SHFE 1809 contract mostly traded below the five-day moving average last night, while inched up to close at 145,810 yuan/mt. Given a weakened LME tin and pessimistic outlook on both macroeconomics and fundamentals, the contract will trade with pressure in the short term. Support is seen at 143,000 yuan/mt.

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