SMM Morning Comments (Jul 13)

SHANGHAI, Jul 13 (SMM) – 

Copper: LME copper touched a high of $6,235/mt after hovering at the daily moving average. It gained $80/mt from Wednesday to close at $6,215/mt, with open interests up 7,000 lots to 323,000 lots. The SHFE 1809 contract also strengthened 220 yuan/mt to close at 48,810 yuan/mt. While copper ore supply is expected to be sufficient in the second half of the year given high output at Chile’s Escondida in May, wage negotiation at the copper mine will be the development to watch. Copper prices will see limited downward room if macroeconomic developments do not exacerbate further. We expect LME copper to trade at $6,200-6,260/mt withthe  SHFE 1809 contract at 48,800-49,300 yuan/mt today. Spot offers are seen at a discount of 30 yuan/mt to a premium of 20 yuan/mt. 

Aluminium: LME aluminium plummeted to a low of $2,032/mt overnight before it recovered some losses following market talk that the US would ease sanctions on Rusal. LME inventory extended its gains overnight. We expect LME aluminium to trade under pressure today. It is seen trading at $2,030-2,065/mt. With its falling LME counterpart, the SHFE 1809 contract fell to the 14,095 yuan/mt level after it hovered around 14,135 yuan/mt. The SHFE/LME ratio rose to 6.9 at closing. Suppressed by its weak LME counterpart, we expect the SHFE contract to trade at 14,000-14,150 yuan/mt today. Spot prices are seen at a discount of 20 yuan/mt to a premium of 20 yuan/mt.

Zinc: While LME zinc inched up 0.45% to close at $2,575.5/mt overnight as trade war concerns eased, it continued to lack upward momentum to stand above $2,600/mt level. It is expected to trade at $2,565-2,610/mt today. The SHFE 1809 contract rebounded above the daily moving average from a low of 20,785 yuan/mt. However, it fell 0.24% from Wednesday to close at 20,920 yuan/mt, without strong support. Investors would take guidance from China and US’ import and export data during the day. The contract is seen trading at 20,800-21,300 yuan/mt today. 

Nickel: LME nickel led gains among base metals overnight as it closed over 2% higher, at $14,245/mt. Inventories across LME warehouses rose 510 mt to 263,730 mt. It is likely to grow at a slower rate in the short run, and trade at $14,200-14,400/mt today. The SHFE 1809 contract mostly traded weakly below the daily moving average as the US dollar gained further to around 95 and market sentiment remained cautious. We see it trading at 113,000-114,500 yuan/mt with spot prices at 112,800-114,300 yuan/mt. 

Lead: LME lead mostly traded weakly but covered losses last night as it rebounded to a high of $2,217/mt near closing. It stopped its decline, and is expected to test support at $2,200/mt today. The SHFE 1808 contract diverged from all moving averages above and showed signs of accelerating decline on its weak LME counterpart. We see it testing resistance at 19,000 yuan/mt today. 

Tin: LME tin rose overnight and stood above the five to 10 day moving average. We expect it to continue its rebound in the near term with resistance at the $20,000/mt level. The SHFE 1809 contract extended its gains overnight. We expect it to remain strongly rangebound in the short term with support from its strong LME counterpart. Resistance is seen at 145,000 yuan/mt.