SMM Morning Comments (Sep 10)

Published: Sep 10, 2018 10:26

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SMM Morning Comments

SHANGHAI, Sep 10 (SMM) –

Copper: A stronger US dollar and aggressive remarks by US President Donald Trump lowered LME copper below the $5,900/mt level. Strong US nonfarm payroll data and faster wage growth boosted the US dollar. This week, market participants should monitor developments of potential US tariffs on $200 billion worth of Chinese goods.

Aluminium: LME aluminium rose to a high of $2,080/mt as workers extended their strike at Alcoa's alumina operations in Western Australia. With pressure at the five- 40- and 60-day moving averages, it closed at $2,063/mt, and may trade at $2,055-2,080/mt today. Longs pulled the SHFE 1811 contract to a high of 14,790 yuan/mt as rumours spread that China will raise the tax refund for aluminium products. The contract closed at 14,735 yuan/mt with heavy pressure at the 20-day moving average. We expect it to trade at 14,680-14,800 yuan/mt today, with spot offers at a discount of 20 yuan/mt to a premium of 20 yuan/mt.

Zinc: LME zinc ended in negative territory at $2,403.5/mt on Friday with pressure at the 10-day moving average and support at $2,400/mt. We expect it to remain under pressure today with lingering risk aversion sentiment among investors. It is likely to test again strength at $2,400/mt with a trading range of $2,380-2,430/mt. The SHFE 1811 contract reversed early gains and settled at 20,650 yuan/mt on Friday night. Social inventories of refined zinc across Shanghai, Tianjin and Guangdong didn’t sharply grow last week. While this might provide some support, SHFE zinc prices still face strong resistance from moving averages above. We expect the SHFE 1811 contract to trade rangebound at 20,400-20,900 yuan/mt today.

Nickel: LME nickel received support at $12,200/mt after fell to an eight-month low of $12,225/mt. It then rebounded to close at $12,335/mt, with LME nickel inventory shrinking 456 mt to 236,250 mt. As longs entered the market cautiously, the SHFE 1811 contract lacked upward momentum after rose to a high of 102,690 yuan/mt. We forecast LME nickel to trade at $12,300/mt today with the 1811 contract at 100,000-102,000 yuan/mt. Spot prices are set at 102,000-108,500 yuan/mt.

Lead: Higher-than-expected US nonfarm payrolls data lifted LME lead to a high of $2,083.5/mt. It closed $16/mt higher at $2,059/mt with open interests up 1,647 lots to 113,506 lots. However, there is still downward room given potential US tariffs. The SHFE 1810 contract also grew over 1% to settle at 18,815 yuan/mt, marking the second consecutive trading day of increase. It stood firm above the 10-day moving average, and inflow of capitals may provide some support today.

Tin: A stronger LME tin bolstered the SHFE 1901 contract to above the five-day moving average. The contract closed at 144,640 yuan/mt with LME tin settled $145/mt higher at $18,975/mt. Pressure above for the contract is set at 146,500 yuan/mt. Investors should take more guidance from the movement in price of LME tin today.

Morning comments Futures movement

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