SMM Morning Comments (Aug 6)

SHANGHAI, Aug 6 (SMM) –

Copper: Three-month LME copper fell to $5,640/mt, its lowest in more than two years on Monday before it recovered some ground to end 0.66% lower at $5,684/mt. The most active SHFE September contract rallied 0.35% to close at 46,110 yuan/mt overnight, bolstered by the softer yuan. The re-escalation of US-China trade tensions added to broad risk aversion, while weak PMIs from Germany and the Eurozone, and deteriorated investor morale in the euro area suggested worsening conditions across the region. This is negative to copper. Technical structure for SHFE copper also showed bearish signals. LME copper is expected to trade between $5,640-5,690/mt today, with SHFE copper at 45,900-46,400 yuan/mt. Spot premiums are seen 50-100 yuan/mt as lower prices of futures attract purchases.

Aluminium: Three-month LME aluminium weakened to a seven-week low of $1,760/mt on Monday before it ended 0.39% lower at $1,766/mt. Russia’s Rusal suspended operations at Achinsk alumina refinery after fire nearby, which will provide some support to LME aluminium. The contract is likely to trade at $1,760-1,800/mt today. The most traded SHFE September contract gained 0.43% to close at 13,885 yuan/mt overnight. SHFE aluminium is expected to remain rangebound, in view of an array of cross currents. It is likely to move between 13,700-13,900 yuan/mt today, with spot prices in a discount of 20 yuan/mt to a premium of 20 yuan/mt.

Zinc: With pressure from the lower Bollinger band, three-month LME zinc extended its decline to a 10-month low of $2,311.5/mt on Monday before it closed 1.19% lower at $2,322.5/mt. The latest flare-up in the US-China trade spat widened Contango on LME zinc, which could lend little support to LME zinc, while support remains at $2,300/mt. LME zinc is expected to trade between $2,300-2,350/mt today. With a weak LME counterpart, the most active SHFE September contract eased 0.21% to end at 19,170 yuan/mt overnight. SMM data showed that social inventories of refined zinc across Shanghai, Tianjin and Guangdong inched up over the weekend, growing the expectations for continual gains in inventories. SHFE zinc is expected to trade between 19,000-19,500 yuan/mt today.

Nickel: Nickel prices climbed on concern over supplies from Indonesia. Three-month LME nickel rebounded to a two-week high of $14,970/mt on Monday before it closed the trading day 2.59% higher at $14,860/mt. Pressure from $15,000/mt will come under pressure today. The most traded SHFE October contract hit a record high of 119,640 yuan/mt overnight, and closed 1.86% higher at 118,200 yuan/mt, above most moving averages. Resistance from 119,000 yuan/mt will come under scrutiny today.

Lead: Three-month LME lead dropped to a 3-1/2-week low of $1,932/mt on Monday before it recovered to close the trading day 0.36% higher at $1,960/mt. The most active SHFE September contract stemmed its recent declines overnight, gaining 0.55% to end at 16,370 yuan/mt, reflecting strength at the middle Bollinger band. The risks of a further drop in SHFE lead remain as the escalation of US-China trade dispute dents risk appetite.  

Tin: Three-month LME tin continued its decline to a new three-year low of $16,735/mt on Monday before it clawed back some losses to end 1.34% lower at $16,875/mt. Support is seen at $16,500/mt. Short-covering helped the most traded SHFE September contract recover from a lower open to end 0.1% higher at 134,110 yuan/mt overnight. Support is seen at 132,000 yuan/mt, while pressure is at the five- and 20-day moving averages.