SMM Evening Comments (Jul 10)

SHANGHAI, Jul 10 (SMM) – SHFE base metals remained under pressure and closed mixed on July 10 as the market monitored developments of the US-China trade conflict. Zinc dropped over 2%, lead fell close to 1% while copper, nickel, tin and aluminium inched up.

The ferrous complex rose across the board except for coking coal. Rebar and hot-rolled coil increased close to 2%, coke gained 0.7% and iron ore nudged up.

Copper: The SHFE 1809 contract recovered some losses after it was dragged down to 49,580 yuan/mt by its weaker LME counterpart today. The contract failed to break the five-day moving average during the day as investors remained cautious. Its MACD green line was relatively tall but is likely to shorten. China’s annual consumer inflation rate and producer prices remained relatively robust in June. The contract is likely to continue to test pressure at the five-day moving average tonight.

Aluminium: The SHFE 1809 contract recovered some losses during the day after touching a low of 14,130 yuan/mt. Open interest in the SHFE aluminium index increased 11,676 lots to 650,550 lots as both shorts and longs added their positions. Costs for primary aluminium are likely to stablise or even rebound as alumina prices rise. Meanwhile, anticipation of a rebound in aluminium inventory grows amid low season of demand and gradually growing newly-commissioned capacity. We, therefore, expect aluminium prices to remain rangebound at lows without a certain direction in the short term.

Zinc: The SHFE 1809 contract extended its overnight decline during the day. Anticipation of inflows of imported zinc grew as losses on imports shrank. Downstream consumption remained weak from a seasonal lull. LME zinc tumbled during European trading hours and the SHFE 1809 contract is likely to be weak tonight with support at the 21,300 yuan/mt.

Nickel: Bolstered by upbeat Chinese economic data, the SHFE 1809 contract hovered above the daily moving average during the morning. It fell in the afternoon to a low of 111,080 yuan/mt, found support at 111,000 yuan/mt closed at 111,990 yuan/mt, up 590 yuan/mt from Monday. With support below at the 60-day moving average, the contract is seen trading around 112,000 yuan/mt with further upward room tonight.

Lead: The SHFE 1808 lead contract initially weakened to a low of 19,435 yuan/mt before it consolidated around the 19,460 yuan/mt level. Its five- and 40-day moving averages crossed and the 10-day moving average expanded downwards. We expect the contract to test pressure at the 19,500 yuan/mt level tonight.

Tin: The SHFE 1809 contract extended its overnight gains during the day. Pressure was seen at the 10-day moving average and some shorts cut their positions. We expect it to continue to trade rangebound in the short term as US-China trade tension remains in the spotlight.