SMM Morning Comments (Aug 1)

SHANGHAI, Aug 1 (SMM) –

Copper: LME copper rebounded to $6,341/mt and closed at $6,322/mt on Tuesday following reports that the US and China are restarting talks to avoid a trade war. The SHFE 1809 contract returned above 50,000 yuan/mt overnight. As longs added their positions, the contract hit a high of 50,200 yuan/mt at one point and closed at 50,090 yuan/mt. We will monitor the sustainability of this upward trend and expect copper prices to trade rangebound in the short term. LME copper is likely to trade at $6,240-6,290/mt today and the SHFE 1809 contract is likely to trade at 49,800-50,200 yuan/mt. Spot premiums are seen at 0-40 yuan/mt as sellers are keen to hold their offers firm.

Aluminium: LME aluminium traded rangebound within a wide range on Tuesday with a high of $2,094/mt and a low of $2,068/mt. While the contract has stood above the five-day moving average, it is likely to continue to hover within a wide range as the US dollar index rose. It is expected to trade at $2,070-2,100/mt today. The SHFE 1809 contract initially jumped to a high of 14,615 yuan/mt overnight. But it fell and closed at 14,515 yuan/mt as shorts entered the market. The contract is likely to stand above the 14,500 yuan/mt level after it has broken through all the moving averages. We expect it to trade at 14,500-14,650 yuan/mt today with spot discounts at 100-60 yuan/mt.

Zinc: LME zinc surged and closed at $2,636/mt on Tuesday. We expect it to try to stand firmly above the 20-day moving average today with a trading range of $2,585-2,635/mt. The SHFE 1809 contract climbed up and closed at 21,685 yuan/mt overnight. Its upward momentum is likely to face pressure as shorts covering their positions buoyed the contract overnight. The contract is likely to try to hold steady today and trade at 21,300-21,800 yuan/mt.

Nickel: LME nickel crept higher and hit $14,120/mt on Tuesday, its highest in close to two weeks. The SHFE 1809 contract also saw strong performance overnight. It went up past the 40-day moving average and hit 113,740 yuan/mt, its highest in close to two weeks. We expect LME nickel to extend its gains today and trade at $13,900-14,100/mt with the SHFE 1809 contract at 112,800-114,000 yuan/mt. Spot prices are seen at 112,300-113,500 yuan/mt.

Lead: LME lead surged to a high of $2,196.5/mt before it inched down to close at $2,164/mt with limited upward momentum. The SHFE 1809 contract traded weakly around the five-day moving average overnight. Developments of the US-Sino trade negotiation will be the key thing to watch today.

Tin: LME tin mostly traded around the 40-day moving average overnight, and gained $40/mt from Monday to close at $20,080/mt. As trade war tension eased, LME tin is likely to gain further in the short run, with pressure at $20,300/mt. However, the SHFE 1809 contract tumbled overnight as longs declined. It lost 1,000 yuan/mt from Monday to close at 147,100 yuan/mt. There is further downward room in the near term. Support will be at 146,000 yuan/mt.