SMM Morning Comments (Aug 7)

SHANGHAI, Aug 7 (SMM) –

Copper: Three-month LME copper recovered 0.36% to end at $5,704.5/mt on Tuesday, while the SHFE 1909 contract traded rangebound at lows to end 0.09% weaker at 46,040 yuan/mt overnight. Open interest for the SHFE copper complex expanded 7,718 lots to 654,000 lots, with the load-up of short positions accounting for the majority. Escalating US-China trade tensions prevented copper prices from recovering. Weak economic situation at home and abroad, together with lower oil prices on demand concerns, continue to weigh on copper. SHFE copper also faces pressure from technical structure. LME copper is expected to trade between $5,630-5,690/mt today, with SHFE copper at 45,700-46,200 yuan/mt. Spot premiums are seen at 50-100 yuan/mt.  

Aluminium: Three-month LME aluminium dropped to a low of $1,759.5/mt on Tuesday before it recovered some ground at end 0.23% lower at $1,762/mt. Tuesday’s losses could be attributed to the news that Rusal has resumed its Achinsk alumina plant which suspended operations earlier this week after a fire broke out nearby. A stronger US dollar is likely to weigh on LME aluminium, which will trade between $1,700-1,800/mt today. As longs trimmed their positions, the most traded SHFE September contract lost 0.18% to end at 13,855 yuan/mt overnight. SHFE aluminium is expected to strengthen in seesaw trade in August-September as demand will pick up earlier than the commissioning of capacity. The contract is expected to trade between 13,800-13,900 yuan/mt today, with spot prices in a discount of 20 yuan/mt to a premium of 20 yuan/mt.  

Zinc: As the US dollar rebounded, three-month LME zinc erased earlier gains to end 0.75% lower at $2,305/mt, lows in more than 10 months, on Tuesday. LME zinc has fallen for six consecutive trading days, and could find little encouragement from fundamentals, with a continued contango structure and smaller-than-expected declines in LME zinc inventories. The $2,300/mt level, however, will offer support. LME zinc is expected to trade at $2,280-2,330/mt today. The October contract became the most active zinc contract on the SHFE overnight. It dropped in early trade before it hovered in a tight range to close 0.91% lower at 18,970 yuan/mt. Shorts were keen to build positions in forward contracts. SHFE zinc is expected to trade between 18,800-19,300 yuan/mt today, with strong bearish sentiment across the markets.

Nickel: Three-month LME nickel fluctuated to close 0.64% higher at $14,955/mt on Tuesday, standing above the five- and 10-day moving averages. It is expected to trade rangebound between $14,800-15,000/mt today. With support from the five-day moving average, the most traded SHFE October contract clawed back some earlier losses to end 0.14% weaker at 118,220 yuan/mt overnight. Resistance from 120,000 yuan/mt will come under scrutiny today.

Lead: Three-month LME lead climbed to $2,018/mt, its highest in a week, on Tuesday before it eased to close its trading day 1.61% higher at $1,991.5/mt. It is expected to remain rangebound in the short run, with pressure from the 20-day moving average and support from the middle Bollinger band. The most active SHFE September contract weakened from earlier highs overnight, as shorts built positions and as its LME counterpart fell. It finished the session 1.19% higher at 16,590 yuan/mt. SHFE lead is likely to weaken today, if it fails to stage a strong open.

Tin: Three-month LME tin rebounded to a high of $17,155/mt on Tuesday before it pared some gains to close the trading day 0.8% higher at $17,010/mt. Support is seen at $16,500/mt, while resistance is at the five-day moving average as high as $17,200/mt. The most traded SHFE September contract shed 0.22% to end at 133,980 yuan/mt overnight. Support is seen at 133,000 yuan/mt in the short term.