SMM Morning Comments (Sep 4)

SHANGHAI, Sep 4 (SMM) –

Copper: Pressure from shorts mounted as open interests across all SHFE copper contracts rose 8,354 lot to 611,000 lots overnight. Pessimistic sentiment over macroeconomy will weigh on copper prices in the near run. The SHFE 1811 contract settled 300 yuan/mt lower at 47,860 yuan/mt. In the spot market, sellers held premiums firm, as traders accounted for most transactions. Spot premiums are seen at 130-170 yuan/mt today.

Aluminium: Poor downstream demand in the expected high season weighed on aluminium prices, but there was limited downward room as costs of raw materials continued to rise. LME aluminium slumped sharply below the 60- and 10-day moving averages to a low of $2,080/mt, and the SHFE 1811 contract also depressed by shorts to the lowest at 14,800 yuan/mt. We forecast the contract to trade at 14,750-14,850 yuan/mt today with its LME counterpart at $2,075-2,105/mt. Spot discounts are seen at 60-20 yuan/mt.

Zinc: LME zinc tested pressure at the 10-day moving average but failed. It mostly traded rangebound below that level overnight with limited upward momentum, despite a decline in LME zinc inventory. We expect it to trade at $2,440-2,490/mt today. The SHFE 1810 contract came down from a high of 21,280 yuan/mt as shorts entered the market. It closed at 21,180 yuan/mt, down 15 yuan/mt from last Friday. We see it trading at 21,000-21,500 yuan/mt today with support from the Bollinger middle band.

Nickel: LME nickel slowed its decline by 0.12%, hovered around the daily moving average and closed at $12,795/mt. We expect it to consolidate around $12,750/mt with the SHFE 1811 contract trading at 104,000-105,500 yuan/mt. Pressure will remain in the short run after large amounts of Norilsk nickel entered the domestic market. Spot prices are likely at 104,500-109,000 yuan/mt.

Lead: As inventories shrank 3,000 mt, LME lead rose to $2,131.5/mt and closed Monday 1.92% higher at $2,128.5/mt. Pressure is seen at the 40-day moving average. The SHFE 1810 contract opened higher and climbed to 19,105 yuan/mt before it fell to 18,935 yuan/mt. It then rebounded and settled overnight 1.28% higher at 19,060 yuan/mt. Investors should monitor if the contract retreats from highs in the near term.

Tin: As the US dollar inched up and macroeconomic concerns intensified, LME fell $120/mt from last Friday to close at $18,790/mt. The SHFE 1901 contract also slid to a low near the 144,000 yuan/mt level as investors added their shorts. Support below is set at 142,500 yuan/mt, and at $18,60/mt for LME tin in the short run.