SMM Morning Comments (Jul 22)

SHANGHAI, Jul 22 (SMM) –

Copper: The most traded SHFE September contract Friday night opened higher on expectations of interest rate cuts from the Fed, before it eased to close 0.27% higher. Oil prices continued to face pressure from worries that a global economic slowdown and trade tensions will lower demand. This exerted pressure on copper prices. Longs appeared keen to cover positions at 48,400 yuan/mt. LME copper is expected to trade at $6,020-6,080/mt today, with SHFE copper at 47,200-47,750 yuan/mt. Spot prices are seen in a discount of 20 yuan/mt to a premium of 70 yuan/mt as prices of futures climbed.

Aluminium: Three-month LME aluminium dropped on Friday after climbing to a more-than two-month high of $1,866/mt, and closed 0.22% lower at $1,847/mt. It is expected to trade between $1,830-1,870/mt today. As longs trimmed their positions, the most active SHFE September contract erased earlier gains to close 0.32% lower at 13,880 yuan/mt on Friday night. It is expected to trade between 13,800-13,950 yuan/mt today, with spot prices in a discount of 30 yuan/mt to a premium of 10 yuan/mt.

Zinc: As shorts loaded up their positions, three-month LME zinc came off from earlier highs to close 1.34% lower at $2,424/mt. Concerns about near-term supply eased after the collapse of the backwardation structure. LME zinc is expected to trade between $2,400-2,450/mt today. The most traded SHFE September contract opened lower and lost 1.08% to close at 19,310 yuan/mt on Friday night. Modest declines in zinc social inventories in China grew expectations of an inventory rebound. The contract is expected to trade around the 20-day moving average today with a range of 19,150-19,650 yuan/mt.

Nickel: Three-month LME nickel snapped a 12-day winning streak and pulled back on Friday, losing 1.97% to end at $14,650/mt. It is expected to trade rangebound at $14,300/mt today, with support from the five-day moving average under scrutiny. The most active SHFE October contract opened lower and shed 1.44% to end at 116,200 yuan/mt on Friday night. Pressure from the five-day moving average and the 116,400 yuan/mt level will come under scrutiny today.

Lead: Three-month LME lead rose to a four-month high of $2,088/mt on Friday before it eased to close 0.49% higher at $2,047/mt. It is likely to stage a correction in the short term, but with limited downside room. Strength from the $2,000/mt level is under scrutiny. The most traded SHFE September contract followed its LME counterpart lower on Friday night, after it hit a fresh three-month high of 16,915 yuan/mt. It lost 0.81% on Friday night and ended at 16,470 yuan/mt, pointing to an end to its recent rally. Weak fundamentals raised the risks of a reversal of earlier gains in SHFE lead.

Tin: Three-month LME tin climbed to a high of $18,170/mt on Friday before it slipped to finish the trading day 0.34% lower at $17,770/mt. Support is seen from a previous low of $17,500/mt. The most traded SHFE September contract weakened 0.33% to end at 134,500 yuan/mt on Friday night. Support is seen at 132,000 yuan/mt while resistance is at 137,500 yuan/mt.