SMM Morning Comments (Jul 19)

SHANGHAI, Jul 19 (SMM) –

Copper: LME copper climbed to around $6,200/mt and closed at $6,180/mt with support from a rebounding zinc. However, it failed to reverse its weak trend overnight. It may receive some support if spot discounts keep narrowing. The SHFE 1809 contract also strengthened, amid declining shorts, to a high of 48,910 yuan/mt. Trading range is expected at $6,180-6,230/mt today for LME copper, and at 48,600-49,100 yuan/mt for SHFE. Spot offers are likely to stand at a discount of 40 yuan/mt to a premium of 10 yuan/mt. 

Aluminium: As longs exited at highs, LME aluminium dived to a low of $2,022/mt during the European trading session after touching $2,045/mt. Open interests dipped 41,670 lots to 615,804 lots, while inventory rose 23,800 mt to close to 1.2 million mt. We expect it to consolidate at $2,020-2,050/mt today. The SHFE 1809 contract was pushed up by a strengthened SHFE zinc to a high of 14,150 yuan/mt. The SHFE/LME price ratio gained further to 6.92. With support from the rising SHFE zinc, the contract is seen trading at 14,050-14,180 yuan/mt today with spot discount at 90-50 yuan/mt. 

Zinc: LME zinc jumped above the 10-day moving average rapidly after it broke resistance at the five-day one. It gained $111.5/mt from Tuesday to close at $2,619.5/mt, covering the losses over one week. Amid falling LME inventory and enthusiasm of longs, LME zinc is set to test pressure at the 10-day moving average today and trade at $2,590-2,640/mt. The SHFE 1809 contract climbed all the way up to a high of 21,430 yuan/mt after standing above the 10-day moving average. However, it needs further support to maintain its gain in the short run. We expect the contract to consolidate at 21,200-21,700 yuan/mt today. 

Nickel: LME nickel rebounded from a low of $13,305/mt and climbed to close at $13,665/mt, with inventory dipping 882 mt to 262,416 mt. It is likely to hover at $13,600/mt today with the SHFE 1809 contract trading at 108,500-110,000 yuan/mt. While the trade war threat depressed market sentiment in general, nickel prices see limited downward room with buoyance from tight supply. Spot prices are seen at 108,500-110,500 yuan/mt today. 

Lead: LME lead plummeted to a low of $2,131/mt during the European trading hours overnight as the US dollar gained. It then recovered most of the losses as its SHFE counterpart strengthened. We expect it to trade in line with SHFE lead today. The SHFE 1808 contract rose to a high of 19,205 yuan/mt overnight as SHFE zinc rebounded. Before close, it came off a little as longs covered their positions. We expect it to fall today. 

Tin: LME tin consolidated with its trading level inching up overnight. We expect it to remain rangebound in the short term with resistance at the $19,800/mt level and support at the $19,000/mt level. The SHFE 1809 contract edged up overnight as shorts cut their positions. We expect it to trade rangebound in the near term with resistance at the 146,000 yuan/mt level.