SHANGHAI, Jul 17 (SMM) – 

Copper: Despite slightly weaker US dollar and narrowing price spread between refined and scrap copper, the market is currently dominated by pessimistic sentiment with longs exiting. LME copper fell from $6,267/mt to a low of $6,150/mt overnight. The SHFE 1809 also slumped, closing 290 yuan/mt lower at 48,700 yuan/mt, with open interests of all contracts down sharply by 23,000 lots to 620,000 lots. We expect LME copper to trade at $6,180-6,240/mt today, and the SHFE 1809 contract at 48,500-49,000 yuan/mt with resistance at the five-day moving average. Spot discounts are seen at 140-100 yuan/mt as sellers hold back amid less supply of imported cargoes. 

Aluminium: LME aluminium jumped to a high of $2,074/mt and closed above the five-day moving average last night. It is likely to trade at $2,030-2,075/mt today amid market expectation of the US lifting its sanctions against Russia given improved relations between the two countries. Dragged down by plunging SHFE lead and zinc, the SHFE 1809 aluminium contract tumbled to a low of 13,990 yuan/mt and closed at 14,035 yuan/mt. The SHFE/LME price ratio dipped to 6.8 overnight. With strong support at the 14,000 yuan/mt level, the contract is seen trading at 13,970-14,100 yuan/mt. Spot discounts are expected to widen to 90-50 yuan/mt to the 1808 contract. 

Zinc: Lacking effective support, LME zinc dived abruptly to below $2,500/mt, leading the loss among base metals. It is expected to trade weakly at $2,460-2,510/mt today. The SHFE 1809 contract followed the movement of LME zinc, and closed 175 yuan/mt lower at 20,170 yuan/mt with an inflow of shorts. We see it testing support at 20,000 yuan/mt today and trading at 19,900-20,400 yuan/mt. 

Nickel: LME nickel fell overnight and closed at $13,630/mt, its lowest in close to three months. The SHFE 1809 contract fell and broke the 110,000 yuan/mt level overnight. We expect nickel prices to continue to trade under pressure in the short term. LME nickel is likely to trade at $13,600-13,900/mt today with the SHFE 1809 contract at 109,000-110,500 yuan/mt. Spot prices are seen at 110,000-112,500 yuan/mt.

Lead: LME lead was depressed by zinc and other weakened base metals contracts to close at a low of $2,165.5/mt. It diverged from the daily moving average further. The SHFE 1808 contract also fell, and closed 2.3% lower at 18,730 yuan/mt, as China’s economic growth came in slower. Outflow of capitals will weigh on the contract in the short run. We see further downward room today. 

Tin: LME tin fell below several moving averages overnight. It is likely to remain rangebound at lows in the short term with support at the $19,000/mt level. The SHFE 1809 contract failed to extend its gains and fell below its daily moving average last night. We expect it to trade under pressure in the near term with support at the 142,500 yuan/mt level.