SMM Morning Comments (Aug 9)

SHANGHAI, Aug 9 (SMM) –

Copper: Copper prices rose on eased risk aversion, with three-month LME copper hit a high of $5,811.5/mt before it ended its trading day 0.59% higher at $5,780/mt. The most active SHFE October contract hovered around 46,700 yuan/mt overnight. Open interest for the SHFE copper complex shrank 12,000 lots to 628,000 lots, as shorts trimmed their positions. A weak global economy and protracted US-China trade dispute, however, will continue to cast a shadow over the copper market. Copper prices are expected to trade rangebound today. LME copper is likely to move between $5,740-5,800/mt, with SHFE copper at 46,400-46,800 yuan/mt. Spot premiums are expected to remain firm at 50-100 yuan/mt, as higher prices of futures dampen purchasing interest and sellers remain keen to hold firm offers.

Aluminium: Three-month LME aluminium advanced 1.25% to close at $1,781/mt on Thursday. It is expected to trade between $1,700-1,800/mt today. SHFE aluminium longs added their positions overnight, as alumina prices are likely to stem their declines earlier than previously expected, following the news that alumina refineries in Xiaoyi of Shanxi province will halve production during August 8-20. The most traded SHFE October contract rose to end at 13,915 yuan/mt. SMM retains its forecasts that aluminium prices will strengthen in seesaw trade in the short to medium term, as a high consumption season will improve profit margins across primary aluminium producers. SHFE aluminium is expected to trade between 13,800-13,950 yuan/mt, today, with spot premiums of 10-50 yuan/mt.

Zinc: As risk appetite improved, three-month LME zinc rallied on Thursday, after seven consecutive trading days of declines. It gained 1.23% to end at $2,303/mt, with the unwinding of short positions primarily accounting for the gains. Upwards expanding KDJ lines, the absence of a substantial widening in the contango structure, and falling LME zinc inventories will improve morale among longs. LME zinc is expected to trade between $2,270-2,320/mt today. The LME lead rally buoyed its SHFE counterpart overnight. The most active SHFE October contract strengthened 0.43% to end at 18,790 yuan/mt, largely bolstered by the load-up of long positions. With better market sentiment, SHFE zinc is expected to trade between 18,600-19,100 yuan/mt today.

Nickel: Three-month LME nickel climbed to a 16-month high of $16,690/mt on Thursday before it erased some gains to close 2.46% higher at $15,830/mt. Resistance from $16,000/mt will come under scrutiny today. The most traded SHFE October contract hit a fresh record high of 127,180 yuan/mt overnight, before it closed 5.38% higher at 126,510 yuan/mt. SHFE nickel is fully above the five-day moving average. Resistance from 130,000 yuan/mt will be crucial to watch today.

Lead: Longs pushed three-month LME lead higher on Thursday, which rose 2.77% to end at a two-week high of $2,075/mt. The contract has clawed back losses from last week. Whether it could surpass $2,100/mt will come under scrutiny. A robust LME lead bolstered the most active SHFE September contract overnight, which extended its gains from a higher open to a four-month high of 16,950 yuan/mt before easing to close 0.69% higher at 16,780 yuan/mt. SHFE lead is likely to pull back in the short run if it fails to convincingly break 16,900 yuan/mt.  

Tin: Three-month LME tin came off from earlier highs to end 0.51% higher at $16,870/mt on Thursday. Support is seen at $16,500/mt. The most traded SHFE September contract pared earlier gains to end 0.4% lower at 135,410 yuan/mt overnight. Support is seen at 133,500 yuan/mt in the short term, while resistance is at 135,600 yuan/mt.