SMM Morning Comments (Aug 27)

SHANGHAI, Aug 27 (SMM) – 

Copper: As the US dollar weakened, LME copper soared to a high of $6,116.5/mt and broke resistance at the 20-day moving average last Friday night. The SHFE 1810 contract grew at a slower rate than LME copper as the yuan rallied. Last week, China reiterated that it would not use yuan devaluation as a tool in its trade war with the US, and named the counter-cyclical measure as a way to support its currency. The contract is expected to face continued pressure at the 20-day moving average and the 49,000 yuan/mt level today, with support at the five- and 10-day moving averages. Spot premiums are likely to be seen at 50-100 yuan/mt. 

Aluminium: LME aluminium was bolstered by rising base metals contracts to a high of $2,109/mt last Friday night. It closed at $2,084/mt with open interests up 3,158 lots to 624,000 lots. SHFE aluminium also strengthened and climbed to a high of 14,865 yuan/mt as longs entered the market. It is likely to trade at 14,700-14,900 yuan/mt today with spot discounts at 70-30 yuan/mt. 

Zinc: LME zinc received support at the five-day moving average and rose above the $2,500/mt level. It closed at $2,526/mt after it surged to a high of $2,549.5/mt as the US dollar softened and its durable goods orders fell faster than expected. The SHFE 1810 contract jumped above the Bollinger middle band and the 40-day moving average, amid low-level SHFE warehouse warrants. The contract is likely to retain its robust trend today and to trade at 21,000-21,500 yuan/mt. 

Nickel: LME nickel increased to approach the $13,500/mt level as the US dollar fell. Its inventory across LME warehouses shrank 948 mt to 242,604 mt. The SHFE 1811 contract rebounded from a low of 108,650 yuan/mt amid low domestic inventory. This came after fresh US tariffs on Chinese stainless steel products depressed market sentiment. We forecast the contract to trade at 108,500-110,000 yuan/mt today with spot prices at 109,000-112,000 yuan/mt. 

Lead: LME lead surged to an intraday high of $2,103/mt before it lost some gains and closed Friday 0.9% higher at $2,078.5/mt. Pressure was seen at $2,100/mt. It is likely to remain rangebound in the short term. The SHFE 1810 contract came off from open highs and ended Friday night 0.63% higher at 18,265 yuan/mt. Open interests for the contract shrank 1,625 lots to 62,322 lots. Rapid increases in SHFE lead prices kept investors cautious.

Tin: LME tin hovered around its five-day moving average and closed at $19,025/mt on Friday. We expect it to remain rangebound in the short run with resistance at $19,400/mt. The SHFE 1901 contract fell after its initial increases on Friday night and settled at 145,440 yuan/mt. We expect it to consolidate today with resistance at 147,000 yuan/mt and support at 143,000 yuan/mt.