SMM Morning Comments (Sep 6)

SHANGHAI, Sep 6 (SMM) –

Copper: LME copper rebounded after five consecutive days of decline, and returned to around $5,900/mt as the US dollar fell. It is expected to stand above that level today. Some 5,000 lots of long positions increased across the SHFE copper contracts overnight, and this buoyed prices. Inflows of imports may weigh on spot premiums to 120-180 yuan/mt today.

Aluminium: With support from high costs of alumina, LME aluminium jumped to a high of $2,087/mt and closed at $2,060/mt. It is likely to consolidate at $2,050-2,080 with limited downward room. The SHFE 1811 contract came down from a high of 14,740 yuan/mt to settle at 14,710 yuan/mt. On Wednesday, Alunorte signed two agreements to resume normal operations at the alumina refinery in Pará, Brazil. The market should also monitor development of the US tariffs on $200 billion worth of Chinese goods. The 1811 contract is set to trade at 14,650-14,750 yuan/mt today with spot discounts up to 40 yuan/mt.

Zinc: LME zinc tested pressure at the five-day moving average and increased to a high of $2,443/mt. It settled the night 0.54% higher at $2,417/mt, and will trade with support at the $2,400/mt level today. LME zinc inventory extended its decline, which is set to benefit prices. The SHFE 1811 contract initially rose above the daily moving average as longs surged. It then hovered around 20,460 yuan/mt and closed at 20,400 yuan/mt. With support at 20,000 yuan/mt, the contract is expected to trade at 20,200-20,700 yuan/mt today.

Nickel: LME nickel broke resistance at the $12,600/mt level and rose to a high of $12,630/mt as the US dollar weakened. It closed at $12,475/mt, with LME inventory shrinking 954 mt to 237,030 mt. The SHFE 1811 contract inched down after it climbed to a high of 103,600 yuan/mt. Long positions entered the market cautiously on concerns over potential, fresh US tariffs. We expect LME nickel to hover at $12,500/mt with the SHFE 1811 contract at 102,000-103,500 yuan/mt today. Spot prices are set at 102,500-108,500 yuan/mt.

Lead: As LME inventory shrank for three consecutive days, LME lead jumped to a high of $2,097/mt before it came off and finished Wednesday 0.85% lower at $2,048.5/mt. We expect it to trade rangebound today. The SHFE 1810 contract plummeted past the 10-day moving average to 18,510 yuan/mt overnight. The contract has settled in negative territory for three consecutive days in the midst of a US-Sino trade war. We expect the contract to stabilise after it falls to lows today.

Tin: LME tin traded under pressure and closed at $18,750/mt on Wednesday. Support is seen at $18,300/mt. The SHFE 1901 contract failed to extend its daytime gains and slid to settle at 144,450 yuan/mt overnight. We expect it to remain weak in the short term with support at 142,500 yuan/mt.