SMM Morning Comments (Jul 24)

SHANGHAI, Jul 24 (SMM) –

Copper: Copper prices eased overnight, as Boris Johnson's win elevated the risks of a 'no-deal' Brexit. Concerns about global growth and demand also weighed on copper, as the International Monetary Fund lowered its global growth outlook. Three-month LME copper fell to a low of $5,950/mt before it ended the trading day 0.59% lower at $5,984/mt, while the most traded SHFE September contract shed 0.82% to close at 46,950 yuan/mt overnight. Open interest for the SHFE copper complex expanded over 10,000 lots, with short positions accounting for the majority. Poor fundamentals could neither offer support to copper. LME copper is expected to trade between $5,960-6,005/mt today, with SHFE copper at 46,700-47,050 yuan/mt. Spot premiums are seen up to 50 yuan/mt, as prices of futures slipped.

Aluminium: Three-month LME aluminium hovered in a wide range on Tuesday, and finished the trading day 0.41% higher at $1,821/mt. With a firmer US dollar, LME aluminium is expected to trade between $1,800-1,840/mt today. The most traded SHFE September contract rallied from earlier lows to close 0.22% lower at 13,770 yuan/mt overnight. This suggested limited upward momentum in SHFE aluminium. The contract is expected to trade between 13,700-13,800 yuan/mt today, with spot prices in a discount of 20 yuan/mt to a premium of 20 yuan/mt.  

Zinc: Three-month LME zinc recovered from earlier losses to finish its trading day 0.74% higher at $2,445.5/mt on Tuesday. Pressure from the 10- and 20-day moving averages is strong as the two adhere to each other. LME zinc is expected to trade between $2,400-2,450/mt today, with limited support from fundamentals as the contango structure widened. The firm LME zinc pushed its SHFE counterpart higher overnight. The most active SHFE September contract rebounded from a low of 19,135 yuan/mt to close 0.34% higher at 19,345 yuan/mt. SHFE zinc rose for a second straight day, with flattish KDJ lines. This suggests limited downward momentum in SHFE zinc, but fundamentals remain weak. The contract is expected to trade between 19,150-19,550 yuan/mt today.

Nickel: Three-month LME nickel extended its declines on Tuesday, tumbling to an intraday low of $14,080/mt before it recovered some ground to close 0.11% lower at $14,225/mt. LME nickel has been fully below the five-day moving average. Whether it can hold onto its ground at $14,000/mt, with support from the 10-day moving average, is crucial to watch today. The most traded SHFE October contract fell to a low of 110,750 yuan/mt overnight before it clawed back some losses to end 1.24% lower at 111,730 yuan/mt. Whether the 10-day moving average could help SHFE nickel remain above 110,000 yuan/mt is key to watch today.

Lead: Three-month LME lead rebounded on Tuesday, and saw its gains accelerate on news that LME lead inventories extended their declines, which suggested that upward momentum sustains in LME lead. The contract advanced 1.34% to end at $2,035/mt. The most active SHFE September contract rapidly rose to a high of 16,560 yuan/mt in early trade overnight, before it hovered in a wide range to close 0.24% higher at 16,495 yuan/mt. Open interest for the contract expanded overnight, indicating that longs expect a further rise from current levels. Longs and shorts diverge at the 16,500 yuan/mt level in the short term, which may lead to some wide swinging trade in both directions.

Tin: Three-month LME tin tumbled to a three-year low of $17,555/mt on Tuesday, before it closed the trading day 1.01% lower at $17,700/mt. Support is seen at the $17,500/mt level. The most traded SHFE September contract slipped to 133,500 yuan/mt in early trade overnight, before it traded rangebound in the rest of trading hours to close 1.33% lower at 133,130 yuan/mt. Support is seen at 132,000 yuan/mt, while resistance is at 137,500 yuan/mt.