SMM Morning Comments (Aug 20)

SHANGHAI, Aug 20 (SMM) –

Copper: LME copper rose on Friday and opened higher at $5,968/mt on Monday. Open interest for SHFE copper contracts shrank some 3,000 lots to 621,000 lots. Copper prices are set to regain some losses after their tumbles earlier last week. LME copper is likely to trade at $5,930-6,000/mt today with the SHFE 1810 contract at 48,000-48,400 yuan/mt. Spot premiums are seen at 170-210 yuan/mt.

Aluminium: LME aluminium fell to a low of $2,018.5/mt before it regained some losses and closed at $2,032/mt on Friday. As the dollar fell, LME aluminium is likely to rebound and trade at $2,030-2,060/mt today. The SHFE 1810 contract declined to a low of 14,370 yuan/mt and settled at 14,405 yuan/mt on Friday night. It traded rangebound as longs and shorts added their positions. We expect the SHFE 1810 contract to trade at 14,350-14,500 yuan/mt today with spot discounts at 70-30 yuan/mt.

Zinc: A sharp increase of cancelled warrants in LME inventories pushed LME zinc to close higher at $2,388.5/mt on Friday. It is likely to trade at $2,390-2,440/mt today. The SHFE 1810 contract climbed on Friday night but met some resistance at 20,000 yuan/mt and settled at 20,005 yuan/mt. Shrinking inventories across Shanghai, Tianjin and Guangdong are likely to provide some support to SHFE zinc. We expect the SHFE 1810 contract to try to stand firmly above the 20,000 yuan/mt level and trade at 19,990-20,490 yuan/mt today.

Nickel: As the dollar weakened, LME nickel jumped above $13,600/mt and closed at $13,555/mt on Friday, leading the gains among nonferrrous metals. As longs added their positions, the SHFE 1811 contract hit a high of 112,160 yuan/mt and closed at 111,610 yuan/mt on Friday night. Inventories in LME and domestic warehouses shrank to the lowest in close to four and two years, respectively, while fundamentals remained upbeat. This also buoyed nickel prices. We expect nickel prices to extend their gains today. LME nickel is likely to trade at $13,700-14,000/mt today with the SHFE 1811 contract at 111,000-112,500 yuan/mt. Spot prices are seen at 110,500-112,500 yuan/mt.

Lead: LME lead remained in a downward trend with pressure from several moving averages above. We expect it to hover around $2,000/mt today. The SHFE 1810 contract rebounded after it fell to a low of 17,280 yuan/mt. As longs surged near closing, the contract jumped and closed at 17,495 yuan/mt last Friday night. It is likely to consolidate at low levels in the short run given macroeconomic uncertainties.

Tin: LME tin traded under several moving averages and finished Friday slightly higher at $18,730/mt. The SHFE 1809 contract remained rangebound at lows on Friday night with support at 141,000 yuan/mt and resistance at 145,000 yuan/mt. Trading in the Shanghai bourse is likely to be thin and prices are likely to remain rangebound as the most traded contract is poised to change.