SMM Morning Comments (Jul 4)

Published: Jul 4, 2018 09:56

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SMM Morning Comments

SHANGHAI, Jul 4 (SMM) –

Copper: Worries over trade war intensified last night as China’s Ministry of Foreign Affairs affirmed its stance towards the tariffs on US goods to be imposed on July 6. LME copper slumped to a low of $6,493/mt during the European trading session and closed at $6,509/mt last night. It is likely to test support at $6,500/mt again in the short term, with trading range of $6,480-6,540/mt today. The SHFE 1808 contract broke support at 51,000 yuan/mt and touched a low at 50,660 yuan/mt last night. Open interests across SHFE copper contracts increased 15,000 lots to 684,000 lots. The 1808 contract is likely to trade at 50,600-51,200 yuan/mt today with spot discounts at 80-30 yuan/mt.

Aluminium: LME aluminium plummeted to a low of $2,083/mt from a high of $2,135/mt overnight. It is likely to trade at $2,077-2,117/mt today. The SHFE 1808 contract also fell and broke the 14,000 yuan/mt level to a low of 13,950 yuan/mt. But it recovered some losses before close. The SHFE/LME ratio went up to 6.7 at close. The contract is likely to trade at 13,900-14,100 yuan/mt today with spot discounts at 70-30 yuan/mt.

Zinc: LME zinc met resistance at $2,850/mt as it tried to climb up when shorts exited. It dived to close at a low of $2,780/mt overnight, down $47.5/mt from the previous day. We see it hovering at $2,760-2,810/mt today. Amid trade war threats, the SHFE 1808 contract also tumbled last night to a low of 22,640 yuan/mt and closed at 22,690 yuan/mt. It is likely to consolidate at 22,550-23,050 yuan/mt today.

Nickel: LME nickel touched a low of $14,330/mt overnight on strong US dollar and trade war worries. It closed at $14,340/mt with pressure at the 10-day moving average. Inventory across LME warehouses shrank 1,908 mt to 269,898 mt. As most base metals dipped on weak Chinese economic data, the SHFE 1809 contract saw an accumulative decline of 4% during two consecutive trading days. It closed at 113,480 yuan/mt, after dipping to a low of 113,290 yuan/mt, with open interests reducing 2,380 lots to 390,000 lots. We expect LME nickel to trade at $14,300-14,600/mt and SHFE 1809 contract at 113,500-115,500 yuan/mt today. Spot prices are seen at 113,800-115,600 yuan/mt.

Lead: LME lead fell below the support of all moving averages last night but saw a relatively slower drop compared with other base metals. It lost $4/mt from the previous day to close at $2,386/mt. The SHFE 1808 contract was dragged down to 19,880 yuan/mt last night among falling base metals prices. Open interests lost 1,688 lots, marking the fourth consecutive day of decrease.

Tin: LME tin remained rangebound under pressure overnight and edged lower before close. The growing LME inventory continued to weigh on tin price, which is expected to trade weakly rangebound in near term. Support, however, is seen at the $19,300/mt level. The SHFE 1809 contract fell after it initially inched up overnight. Pressure is seen from its weak LME counterpart and the sluggish demand in China amid low season. We expect it to continue its current pattern in the short term with support at the 143,000 yuan/mt.

Morning comments Futures movement

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