SMM Morning Comments (Jun 25)

Published: Jun 25, 2018 09:55 (GMT+8)

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SMM Morning Comments

SHANGHAI, Jun 25 (SMM) –

Copper: LME copper continued to consolidate around the $6,800/mt level last Friday, while the SHFE 1808 contract hovered within a narrow range. The liquidity brought by China’s reserve requirement ratios (RRR) cut is likely to ease the pressure at the 51,500 yuan/mt level for SHFE copper price. The SHFE 1808 contract is likely to rebound in near term. Spot discounts are seen slightly smaller at 150-100 yuan/mt.

Aluminium: LME aluminium rebounded to a high of $2,188.5/mt last Friday night as the US dollar dipped. It closed at highs at $2,176.5/mt with open interests declining 188 lots to 670,000 lots. We see it trading rangebound around the five-day moving average at $2,170-2,190/mt today. After slumping to a low of 14,160 yuan/mt, the SHFE 1808 contract climbed up to close at 14,220 yuan/mt as its LME counterpart strengthened. The contract will trade with pressure as domestic inventory is expected to decline less over the weekend on lower consumption. Its trade range is seen at 14,100-14,300/mt today with spot discounts at 60-20 yuan/mt.

Nickel: LME nickel rose last Friday and led the increases among other metals. The SHFE 1809 contract hovered around the daily moving average within a narrow range last Friday night and strengthened before close. Nickel prices also gained support from the shrinking inventory in Chinese and LME warehouses, limited nickel pig iron (NPI) production on China’s intensive environmental protection initiatives, growing stainless steel production on recovered profits and the newly commissioned 1-million-mt stainless steel project by Indonesia Tsingshan. We expect LME nickel to continue to rise today with the SHFE 1809 contract at 116,600-118,500 yuan/mt. Spot prices are seen at 116,300-118,300 yuan/mt.

Zinc: Amid growing bearish sentiment, LME zinc weakened to the lowest level so far this year last Friday before it stabilised with support at the $2,900/mt level. We expect it to continue its rangebound pattern and trade at $2,910-2,960/mt today. The SHFE 1808 contact rose last Friday night and found support at the 23,000 yuan/mt level and the lower Bollinger band. The RRR cuts would also give some support to SHFE zinc price. The contract is likely to trade at 22,900-23,300 yuan/mt today.

Lead: LME lead avoided a continuous decline last Friday and rebounded above $2,400/mt. It is likely to continue its rangebound pattern around the same level today. The SHFE 1807 contract saw some open interests flow into the 1808 contract last Friday. Support at the 19,900 yuan/mt level remained strong but investors were keen to take profits and leave at high levels last Friday night. We expect the contract to consolidate at the 19,900 yuan/mt level in the short term.

Tin: LME tin mostly traded around the five-day moving average last Friday night. It closed below that level at $20,440/mt as data showed that Indonesia’s export of refined tin increased 79% year on year in May to 12,493 mt. It is likely to trade with pressure today but support is seen at $20,300/mt. The SHFE 1809 contract also hovered around the five-day moving average with limited momentum on a weakened LME tin and slow domestic consumption. We see it consolidating at current levels in the short run.

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