SMM Morning Comments (Jun 29)

SHANGHAI, Jun 29 (SMM) –

Copper: LME copper fell to a low of $6,589.5/mt during the European trading hours as longs saw limited support both from the macro and fundamental fronts. The SHFE 1808 contract rose above the daily moving average after touching a low of 51,080 yuan/mt. Copper prices remained under pressure in the short term given the strong US dollar and bearish sentiment in emerging markets. LME copper is likely to trade at $6,600-6,650/mt today, while the SHFE 1808 contract is likely to trade at 51,300-51,700 yuan/mt. Physical trading is expected to be extremely thin in the on the last day by mid-year. Spot discounts are seen at 200-150 yuan/mt.

Aluminium: LME aluminium remained a rangebound trend last night. It dipped to a low of $2,142/mt with open interests up 2,702 lots to 672,000 lots. Its trading range today is expected at $2,140-2,170/mt. The SHFE 1808 contract also weakened overnight with the lowest level at 14,085 yuan/mt. We see it trading at 14,000-14,200 yuan/mt today with spot discount at 90-50 yuan/mt. Key thing to watch today will be trade negotiations between China and the US.

Zinc: LME zinc hit a high of $2,931/mt overnight due to a surge in cancelled warrants. It is likely to consolidate at $2,870-2,920/mt today. While the SHFE 1808 contract dipped during the night trading hours, it found strong support and managed to stand firmly at the 23,000 yuan/mt level with its trading level climbing up. It is likely to consolidate at 22,950-23,400 yuan/mt today.

Nickel: LME nickel touched a low of $14,720/mt overnight on the strong US dollar and worries over trade wars. The SHFE 1809 contract consolidated around the 115,745 yuan/mt below the daily moving average after it met pressure at the 116,400 yuan/mt level. Gradual recovery of nickel pig iron (NPI) production, lowering losses on imports and the import arbitrage window likely to open in July all contributed to the declines in nickel prices. We expect LME nickel to trade rangebound at $14,650-14,900/mt today and the SHFE 1809 contract to trade at 114,600-116,400 yuan/mt. Spot prices are seen at 114,800-116,600 yuan/mt.

Lead: LME lead broke the support at the five-, 10- and 40-day moving averages to a low of $2,390.5/mt last night before it rebounded to the $2,400/mt level. As risk aversion lingers, LME lead is likely to remain under pressure and weaken in the near term. While the SHFE 1808 contract failed to extend its consecutive gains overnight, we see its upward trend unchanged.

Tin: LME tin traded weakly last night on a strong US dollar and increased LME tin inventory. It touched a low of $19,625/mt and is likely to dip further in the short term. Support below is seen at $19,300/mt. A weaker LME tin and oversupply in the domestic market depressed the SHFE 1809 contract to a low of 143,600 yuan/mt last night. Further downward room is expected in the short run with support expected at 143,000 yuan/mt.