SMM Morning Comments (Jun 26)

Published: Jun 26, 2018 09:56 (GMT+8)

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SMM Morning Comments

SHANGHAI, Jun 26 (SMM) –

Copper: The SHFE 1808 contract opened below the 60-day moving average and touched a low of 51,370 yuan/mt overnight. LME copper broke the support at the $6,800/mt level overnight despite a strike threat at Codelco's Chuquicamata mine in Chile. In China, downstream demand remained sluggish amid slack season and cash woes towards the end of the first half despite the RRR cut. We expect LME copper to trade at $6,700-6,760/mt today with the SHFE 1808 contract at 51,300-51,800 yuan/mt. Spot discounts are likely to widen to 190-140 yuan/mt as downstream buying momentum further shrinks towards the mid-year.

Aluminium: LME aluminium was dragged down by its SHFE counterpart to close at a low of $2,149.5/mt last night. It is expected to recover some losses and move close to the five-day moving average during the day. Trading range is seen at $2,140-2,165/mt. The SHFE 1808 contract traded below all moving averages with pressure amid slack season. It touched a low of 14,020 yuan/mt overnight as investors added their shorts. We see it hovering at lows around the five-day moving average today. Trading range is set at 14,000-14,200 yuan/mt with spot discount at 60-20 yuan/mt.

Zinc: LME zinc plummeted to a low of $2,835/mt overnight, a fresh low in close to 11 months. We expect it to test the rangebound level seen in the first quarter of 2017 and trade at $2,825-2,875/mt today. The SHFE 1808 contract also found some support at the level seen in the first quarter of last year. Inventory in Shanghai, Guangdong and Tianjin shrank. We expect the contract to recover some losses today and consolidate at 22,250-22,750 yuan/mt.

Nickel: The escalating trade tensions weighed on the nickel market overnight as LME nickel tumbled to a low of $14,730/mt before it hovered around the $14,786/mt level. As shorts continued to add their positions, the SHFE 1809 contract plummeted to a low of 113,900 yuan/mt after it traded around the daily moving average. Support for nickel prices, however, sustains from the shrinking inventory and limited nickel pig iron (NPI) production on China's intensive environmental protection initiatives. We expect LME nickel to trade rangebound at highs today with the SHFE 1809 contract at 114,400-116,400 yuan/mt. Spot prices are seen at 115,000-117,000 yuan/mt.

Lead: LME lead climbed up to a high of $2,427.5/mt during the European trading session as the US dollar dipped. It then hovered around $2,400/mt and closed at $2,411.5/mt. The SHFE 1808 contract fell below the daily moving average last night with pressure from shorts after surging to a high of 19,835 yuan/mt. The contract lacks upward momentum as short positions exceed longs by some 3,000 lots. We expect it to consolidate at current levels today.

Tin: The market jittered on fears of US investment restrictions on China, leaving LME tin in decline overnight with support at the $20,000/mt level. The SHFE 1809 contract moved below the five-day moving average last night with its trading level slightly down. It is likely to remain under pressure today with possibility to extend its decline. Support is seen at the 143,000 yuan/mt level.

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