SMM Morning Comments (Aug 15)

SHANGHAI, Aug 15 (SMM) –

Copper: The strengthening dollar continued to weigh on copper prices overnight. LME copper dropped past $6,100/mt and is likely to test support at $6,000/mt. Meanwhile, the SHFE 1810 contract fell to 49,860 yuan/mt as shorts added their positions. Open interests for SHFE copper contracts increased by 10,810 lots. We expect LME copper to trade at $6,000-6,050/mt today with the SHFE 1810 contract at 48,700-49,100 yuan/mt. Spot premiums are seen at 0-50 yuan/mt over the September contract.

Aluminium: LME aluminium on Tuesday recovered most of its early losses and closed at $2,069.5/mt after it touched $2,045/mt, its lowest in close to a week. It is likely to trade at $2,050-2,080/mt today under the pressure from a strong dollar. The SHFE 1810 contract rebounded to 14,665 yuan/mt and closed at 14,635 yuan/mt after it opened lower and fell to 14,580 yuan/mt. We expect it to trade rangebound at 14,580-14,750 yuan/mt with spot discounts up to 40 yuan/mt.

Zinc: LME zinc finished Tuesday 0.69% lower at $2,450/mt as another inventory build of 10,500 mt sent it to an intraday low of $2,443.5/mt. Growing inventories suppressed upward momentum. We expect it to trade at $2,440-2,490/mt today. The SHFE 1810 contract fell overnight to the 20,700 yuan/mt level and closed at 20,720 yuan/mt with support at 20,650 yuan/mt. The contract fell below the lower Bollinger band and trod on a downward path. Its five-day moving average rose above the 20-day moving average and created much pressure for the contract. We expect it to trade at 20,500-21,000 yuan/mt today.

Nickel: LME nickel declined to a low of $13,380/mt. It closed at $13,425/mt with LME inventory slipping 60 mt to 248,712 mt. Rising shorts also lowered the SHFE 1811 contract below the daily moving average. Open interests increased 19,000 lots to 302,000 lots. As the US dollar index hovers at highs, we expect LME nickel to trade weakly around $13,400/mt today with the SHFE 1811 contract at 110,500-112,000 yuan/mt. Spot prices are likely at 111,000-112,500 yuan/mt.

Lead: LME lead plummeted to a low of a year at $2,069.5/mt and settled at $2,074/mt on Tuesday. The 1.4% drop dragged the metal away from its previous rangebound level, and opened a downward path. The weak LME lead also weighed down its SHFE counterpart. The SHFE 1809 contract lost all its early gains, dropping to a low of 18,160 yuan/mt and finished its night session 0.16% lower at 18,215 yuan/mt. We expect the contract to trade rangebound today as the August contract is slated for delivery today.

Tin: LME tin slumped overnight to a low of $18,930/mt and closed $235/mt lower from Monday at $19,090/mt. It is likely to dip further in the short run with support at $18,700/mt. The SHFE 1809 contract is also expected to continue its weak performance today, with support at 142,500 yuan/mt.