SMM Morning Comments (Jul 30)

SHANGHAI, Jul 30 (SMM) –

Copper: LME copper fell before close and touched a low of $6,225/mt last Friday while its SHFE counterpart also tumbled before close and touched a low of 49,950 yuan/mt. We expect LME copper to trade at $6,230-6,290/mt today with the SHFE 1809 contract at 49,900-50,400 yuan/mt. Spot discounts are seen at 80-40 yuan/mt. Workers at the world’s largest copper mine Escondida in Chile agreed to vote on their strike option after the union rejected BHP’s final salary offer. The vote began on Saturday and would continue through the middle of this week.

Aluminium: LME aluminium lost all of its early gains in the night trading hours and closed above the 10-day moving average last Friday. We expect it to trade rangebound between the 10- and five-day moving averages today with a trading range at $2,050-2,070/mt. The SHFE 1809 contract traded strongly rangebound last Friday night and hit a high of 14,445 yuan/mt. But strong pressure was seen at the 60-day moving average. The contract closed at 14,410 yuan/mt as longs covered their positions and shorts added their bets before close. We expect the contract to trade at 14,350-14,450 yuan/mt today. Spot discounts are seen at 120-80 yuan/mt.

Zinc: LME zinc weakened but found support at the 10-day moving average last Friday. Pressure sustained at $2,600/mt. We expect it to hover at $2,565-2,615/mt and above the 10-day moving average today. As longs seemed more confident and shorts covered their positions, the SHFE 1809 contract climbed past the 10- and 20-day moving averages last Friday night. On the macro front, the Chinese government’s fiscal stimulus bolstered the anticipation of growth in infrastructure construction while the uncertainty brought by the US-China trade war sustained. We expect the 1809 contract to hold steady at 21,300-21,800 yuan/mt today.

Nickel: LME nickel faced pressure at the 20-day moving average with support at $13,770/mt as the US dollar weakened. LME inventory shrank 1,830 mt to 257,502 mt. Trading range is set at $13,700-13,900/mt today. The SHFE 1809 contract climbed up to a high of 113,140 yuan/mt on robust Chinese economic data last Friday night. Given low domestic inventory and high demand for #300 stainless steel, we expect the contract to trade at 112,000-113,500 yuan/mt today with spot prices at 112,000-113,500 yuan/mt.

Lead: LME lead lost its previous gains last Friday and touched an intraday low of $2,132.5/mt before close. We expect it to test support at $2,100/mt today. The SHFE 1809 contract retreated to the five-day moving average last Friday night after consecutive gains, dragged by its weakened LME counterpart. We expect it to trade at 18,550-18,700 yuan/mt today. Market participants should monitor the positions held by shorts in the short term as shorts appeared keen to build positions.

Tin: LME tin traded rangebound last Friday night and we expect it to stay in such pattern in the short run with pressure from lingered trade war threat. The SHFE 1809 contract continued its upward trend, rising to a high of 147,000 yuan/mt and hitting the 60-day moving average. It is likely to test resistance at that level today.