SMM Morning Comments (Aug 21)

SHANGHAI, Aug 21 (SMM) –

Copper: As the dollar weakened, copper prices continued to rebound overnight with LME copper hitting a high of $6,033/mt. The SHFE 1810 contract rose to 48,470 yuan/mt and open interests for the SHFE copper contracts remained at some 600,000 lots. We expect copper prices to continue their rangebound and strong performance in the short term and LME copper to test the pressure at the 10-day moving average. LME copper is likely to trade at $5,980-6,040/mt today with the SHFE 1810 contract at 48,400-48,800 yuan/mt. Spot premiums are seen at 230-270 yuan/mt.

Aluminium: LME aluminium hit a high of $2,084.5/mt during the European session before it finished1.3% higher at $2,058.5/mt on Monday. We expect LME aluminium to trade at $2,050-2,070/mt today. The SHFE 1810 contract opened higher and rose to a high of 14,710 yuan/mt before it lost some early gains and closed at 14,645 yuan/mt overnight. Aluminium prices received a boost from the latest increase in National Aluminium Company (Nalco)’s alumina shipment price. We expect the SHFE 1810 contract to trade at 14,550-14,700 yuan/mt today with spot discounts at 70-30 yuan/mt.

Zinc: LME zinc came off from early highs and finished Monday 0.52% lower at $2,376/mt. It is likely to test the resistance at $2,400/mt again today with a trading range of $2,370-2,420/mt. The SHFE 1810 contract opened lower but rose to a high of 20,250 yuan/mt overnight as longs added their positions and as shorts covered their positions. It then reversed some gains and settled at 20,145 yuan/mt. SHFE zinc prices also received some support from shrinking inventories across Shanghai, Tianjin and Guangdong and the high spot premiums. We expect the 1810 contract to try to stand firmly above 20,000 yuan/mt today with a trading range of 20,000-20,500 yuan/mt.

Nickel: As the dollar weakened, LME nickel climbed past $13,700/mt and closed at $13,615/mt on Monday. As longs added their positions, the SHFE 1811 contract hit a high of 112,830 yuan/mt before it edged down and closed at 112,180 yuan/mt overnight. Shrinking inventories and upbeat fundamentals front also buoyed nickel prices. We expect nickel prices to extend their gains today. LME nickel is likely to hover around $13,700 today with the SHFE 1811 contract trading at 112,000-113,500 yuan/mt. Spot prices are seen at 112,000-114,000 yuan/mt.

Lead: LME lead broke its rangebound trend near closing overnight and touched a low of $1,975/mt with pressure from shorts. We expect it to trade weakly today. The SHFE 1810 contract fell back to around the daily moving average with resistance from the five-day moving average. It was then dragged down by its weakened LME counterpart, to a low of 17,450 yuan/mt. Further downward room is expected in the contract in the short run.

Tin: LME tin regained some ground at the five-day moving average and closed higher at $18,790/mt on Monday. It is likely to remain strong in the short term with resistance at $19,100/mt. The SHFE 1809 contract opened higher but fell overnight, without support from its strong LME counterpart. We expect it to remain under pressure in the short run given the low season in the Chinese market and as the most traded SHFE tin contract is about to change. Support is seen at 141,000 yuan/mt.