SMM Morning Comments (Aug 17)

SHANGHAI, Aug 17 (SMM) –

Copper: LME copper bounced back and closed at $5,890/mt on Thursday after hitting a high of $5,957/mt. The SHFE 1810 contract also rose to close at 47,830 yuan/mt overnight. While the risk of a strike at BHP’s Escondida copper mine in Chile has temporarily wound down, the movement of Chinese yuan and the performance of Chinese economy would be key. Spot premiums are seen higher at 100-140 yuan/mt today given the early tumbles in futures prices.

Aluminium: LME aluminium reversed all early losses to a high of $2,056/mt before it edged down and closed at $2,038/mt on Thursday. We expect it to test the five-, 10- and 20-day moving averages today with a trading range of $2,020-2,070/mt. The SHFE 1810 contract fell and closed at 14,450 yuan/mt overnight after it hit a high of 14,535 yuan/mt. We expect it to trade at 14,400-14,550 yuan/mt today with spot discounts at 70-30 yuan/mt.

Zinc: LME zinc rebounded and finished Thursday 4.2% higher though it met strong resistance at $2,400/mt. It is likely to test that level again and trade rangebound at $2,370-2,420/mt today. The SHFE 1810 contract climbed to a high of 20,160 yuan/mt and closed at 20,025 yuan/mt overnight after its initial decline to 19,560 yuan/mt. As the contract found some support at 20,000 yuan/mt overnight, it is likely to test strength at that level today with a trading range of 19,900-20,400 yuan/mt.

Nickel: LME nickel jumped past $13,400/mt before it met pressure at $13,500/mt and closed at $13,340/mt on Thursday. The SHFE 1811 contract climbed to 111,450 yuan/mt before it edged down, hovering around the daily moving average, and closed at 110,620 yuan/mt overnight. Decreasing inventories and upbeat fundamentals in China also buoyed nickel prices. We expect the prices to extend their gains today. LME nickel is likely to hover around $13,000/mt today and the SHFE 1811 contract is expected to trade at 110,000-111,500 yuan/mt with spot prices at 109,000-111,000 yuan/mt.

Lead: LME lead clawed back losses made in the previous day and finished Thursday almost 3% higher at $2,006.5/mt. However, the volatile macro environment is likely to drag it further down after a brief respite. The SHFE 1809 contract came off from a high of 17,975 yuan/mt and lost most of early gains, settling at 17,770 yuan/mt overnight. It is likely to trade rangebound today.

Tin: LME tin rebounded during the Asian trading session, and closed $270/mt higher from Wednesday at $18,610/mt. Although the US dollar inched down a bit, the metal is expected to trade with continued pressure given uncertainties from the macro economy. Pressure above will be at $19,000/mt. The SHFE 1809 contract mostly hovered around 143,200 yuan/mt overnight without upward momentum. It is expected to face pressure at 144,000 yuan/mt with support at 141,000 yuan/mt.