SMM Morning Comments (Jul 18)

SHANGHAI, Jul 18 (SMM) – 

Copper: LME copper was depressed by a stronger US dollar to a low of around $6,150/mt. The SHFE 1809 contract also dropped with pressure, closing 270 yuan/mt lower from Monday at 48,590 yuan/mt. However, we expect copper prices to see limited downward room in the short term as the union at Escondida rejected BHP’s offer and a threat of strike remains. LME copper is likely to trade at $6,140-6,200/mt, with the SHFE 1809 contract at 48,500-49,000 yuan/mt. Spot discounts are set to narrow to 90-50 yuan/mt today. 

Aluminium: LME aluminium traded within a broad range overnight with support at the five-day moving average and resistance at the 10-day one. It closed at $2,031.5/mt after touching a low of $2,030.5/mt, with LME inventory surging 19,375 mt to 1.18 million mt. We expect it to trade at $2,025-2,060/mt today. The SHFE 1809 contract stood firm above the 14,000 yuan/mt level with cost support, while weakened LME aluminium and slower growth of Chinese economy dampened market sentiment. Without strong upward momentum, it is likely to consolidate at 14,000-14,100 yuan/mt today, with spot discounts at 80-40 yuan/mt. 

Zinc: LME zinc halted its upward trend after touching a high of $2,527/mt during the European trading session, with pressure from a rising US dollar. It gained $32/mt from Monday to close at $2,508/mt. Lacking momentum, however, it is likely to trade weakly around $2,475-2,525/mt today. The SHFE 1809 rebounded slightly last night but pressure remains from macroeconomy. Its trading range is set at 20,100-20,550 yuan/mt today.

Nickel: LME nickel closed at a four-month low of $13,545/mt overnight. Inventory across LME warehouses, however, dipped 222 mt to 263,298 mt. The SHFE 1809 contract tested resistance at the 109,000 yuan/mt level, but returned to the daily moving average as the US dollar strengthened. Nickel prices are expected to trade under pressure in the short run but with limited downward room due to relatively tight supply. We see LME nickel trading around $13,500/mt today and the SHFE 1809 contract at 108,000-110,000 yuan/mt. Spot prices are set at 108,500-110,500 yuan/mt. 

Lead: LME lead traded rangebound at lows overnight with its downward trend lingering. We expect it to consolidate today. The SHFE 1808 contract came off from a high of 18,940 yuan/mt and we expect it to halt the decline in the near term with no further development in the US-China trade disputes.

Tin: LME tin consolidated within a narrow range under pressure at the short-term moving average overnight. We expect it to be rangebound in the near term with support at the $19,000/mt level. The SHFE 1809 contract also hovered within a narrow range with support at the 142,500 yuan/mt level overnight. We expect the contract to continue to trade under pressure in the short term given its weak LME counterpart and sluggish demand in China.