SMM Morning Comments (Aug 7)

SHANGHAI, Aug 7 (SMM) –

Copper: LME copper fell to a low of $6,064/mt, and closed at $6,105/mt on Monday. The SHFE 1809 contract opened lower but recovered some losses later, closing at 49,330 yuan/mt. Shorts are likely to drag LME copper down to the $6,000/mt level with escalating US-China trade wars. We expect LME copper to trade at $6,070-6,130/mt today with the SHFE 1809 contract at 49,000-49,500 yuan/mt. Spot premiums are likely to sustain at 70-100 yuan/mt today.

Aluminium: As investors added their long bets, the most-traded aluminium contract on the SHFE rose to a high of 14,485 yuan/mt and closed at 14,475 yuan/mt overnight. Its strong performance bolstered LME aluminium, which rebounded and closed at $2,053/mt on Monday. We see upward momentum for SHFE aluminium in anticipation of winter production cuts and rising prebaked anode prices. Besides, inventory across China continued to decrease and consumption remained solid. We expect the SHFE 1810 contract to trade at 14,400-14,550 yuan/mt with LME aluminium at $2,040-2,060/mt today. Spot discounts are seen at 70-30 yuan/mt.

Zinc: LME zinc clawed back some early losses but traded under pressure at the middle Bollinger band on Monday. We see limited upward room for it and expect it to consolidate at $2,560-2,610/mt today. The SHFE 1810 contract opened lower but climbed overnight as shorts cut their positions. We expect the contract to consolidate at 21,300-21,800 yuan/mt today.

Nickel: LME nickel reversed early losses, hitting a high of $13,725/mt and closing at $13,700/mt last night. The SHFE 1809 contract jumped past the 40-day moving average to a high of 112,780 yuan/mt and closed at 112,480 yuan/mt overnight. The shrinking LME and SHFE inventory gave some support to nickel prices. We expect LME nickel to hover around $13,600/mt today with the SHFE 1809 contract at 110,000-112,000 yuan/mt. Spot prices are seen at 111,000-113,000 yuan/mt.

Lead: LME lead fell to a year’s low of $2,074/mt during the European trading session as lead inventory increased 450 mt. With support at $2,100/mt, it then went back up and to close at $2,115.5/mt. Support at the $2,100/mt level is expected to stay in the short term. The SHFE 1809 contract also rebounded after tumbling to a one-year low at 17,750 yuan/mt. We expect it to consolidate around 18,000 yuan/mt today.

Tin: A strengthened US dollar dragged LME tin to a low of $19,480/mt overnight. With support at $19,200/mt, it is expected to continue its weak trend in the short run. The SHFE 1809 contract traded more strongly than its LME counterpart, and gained 450 yuan/mt from last Friday to close at 146,460 yuan/mt on Monday. Resistance is seen at 147,000 yuan/mt with support at 145,000 yuan/mt today.