SMM Morning Comments (Jun 26)

SHANGHAI, Jun 26 (SMM) – 

Copper: A buildup of longs bolstered the most-traded SHFE August contract to a high of 47,530 yuan/mt, before it ended 0.57% higher overnight. Senior Chinese and US trade officials speaking by telephone ahead of trade talks at a G20 summit later this week boosted the market. However, doubts over the outcome of US-China trade talks will keep copper prices fluctuating today. We expect the contract to trade between 47,100-47,600 yuan/mt, with three-month LME copper at $6,000-6,050/mt today. Spot premiums are likely to slip to 10-60 yuan/mt on lower demand from long-term contracts. 

Aluminium: Upbeat macroeconomic sentiment buoyed three-month LME aluminium to a high of $1821.5/mt, after it hovering around the five- and 10- day moving averages. It closed 0.72% higher at $1,813/mt, supported by longs, with the K-indicator testing the 60-day moving average above. The most-active SHFE August contract recovered after it fell below support from 13,870 yuan/mt, ending at 13,915 yuan/mt. It is expected to trade between 13,800-14,200 yuan/mt with LME aluminium at $1,790-1,830/mt today. 

Zinc: As macroeconomic sentiment improved, three-month LME zinc rebounded and tested the Bollinger middle band after higher LME inventories dragged it to $2,520/mt. It gained 1.77% overnight and closed at $2,534/mt, with resistance from the 40-day moving average. The most-liquid SHFE August contract shrugged off pressure from the 20-day moving average and ended 0.83% higher on the day at 20,100 yuan/mt, driven by lower social inventories of refined zinc. However, falling spot premiums amid sluggish consumption are unlikely to extend the decline in social stocks, which will limit the upside room in prices. Today, we see the contract trading at 19,900-20,400 yuan/mt, with LME zinc at $2,510-2,560/mt. 

Nickel: Three-month LME nickel retreated after jumped to a high of $12,375/mt, ending 0.98% higher on the day at $12,310/mt. The most-traded August contract closed higher as it tested the Bollinger upper band and pressure from 100,700 yuan/mt, settling at 100,290 yuan/mt. Today, LME nickel is expected to test support from the five-day moving average, hovering at $12,200-12,400/mt, with the SHFE August contract consolidating above 100,000 yuan/mt. Spot prices are seen at 99,500-101,000 yuan/mt. 

Lead: Three-month LME lead rebounded from a low of $1,901.5/mt in a broad base metals price rally, and gained 1.07% to close at $1,935/mt. The upward momentum is unlikely to continue in the short term given pressure from the $1,950/mt level. The most-active SHFE August contract increased for the third straight day as it rose to a high of 16,310 yuan/mt and finished at 16,280 yuan/mt, up 0.37% on the day. Pressure above will remain concerning for prices today. 

Tin: Three-month LME tin climbed to the highest overnight at $19,130/mt as crude oil prices increased on lower inventories. With pressure from the 20-day moving average, however, it ended slightly lower on the day at $19,020/mt. Support below is seen from $18,800/mt today. The most-active SHFE September contract regained losses from early trades as it rallied from a low of 143,860 yuan/mt and finished 0.1% higher at 144,100 yuan/mt. It will trade with resistance from the 20-day moving average, or 144,400 yuan/mt today.