SMM Morning Comments (Aug 28)

SHANGHAI, Aug 28 (SMM) – 

Copper: Prices of copper moved higher overnight with buoyance from the off-shore yuan and eased trade fears. But weak macroeconomic support and an absence of improvement in copper downstream demand will dampen any upward momentum in prices. With pressure from the 40- and 60- day moving averages, the most-active SHFE October contract received support from the 20-day moving average and settled 0.39% higher overnight. Three-month LME copper hovered around $5,680/mt and gained 0.77% on the day. Today, LME copper is seen trading between $5,640-5,690/mt, with the SHFE October contract between 46,400-46,700 yuan/mt. 

Aluminium: Three-month LME aluminium gave up all the gains accumulated overnight and slid to a low of $1,758.5/mt, ending down 0.42% on the day at $1,760/mt. With further downside room, it is expected to trade between $1,740-1,760/mt today. The most-liquid SHFE October contract, however, traded robustly with fundamental support, rallying from a low of 14,235 yuan/mt and closed 0.25% higher on the day at 14,285 yuan/mt. Expectations of demand recovery after the slow season may keep the contract between 14,200-14,300 yuan/mt today. 

Zinc: Declines in LME zinc inventories and news around production cuts at an overseas smelter boosted confidence in longs, and buoyed three-month LME zinc to highs around $2,270/mt, settling it 1.49% higher on the day at $2,280/mt. Pressure above from the 20-day moving average will keep it between $2,240-2,290/mt today. The most-active SHFE October contract jumped above the 20-day moving average and finished the trading day 0.61% higher at 18,835 yuan/mt. Shorts departed on signs of consumption pick-up. But uncertainty remained around upward momentum in the contract given resistance above from 19,000 yuan/mt. The contract is expected to trade between 18,400-18,900 yuan/mt today. 

Nickel: Three-month LME nickel lost all the gains from earlier trades overnight as it slipped from a high of $15,910/mt, and fell below the five-day moving average after unsuccessfully tested pressure from the 10-day moving average. It dipped 0.1% to close at $15,655/mt, and may test support from $15,700/mt today. The most-active SHFE October contract found support from the five- and 10- day moving averages after it dropped sharply to a low of 123,720 yuan/mt right after opening. Pressure above from 126,000 yuan/mt should be watched today. 

Lead: A broad LME price rally lifted three-month LME lead, which rose to a high of $2,095/mt and closed up 1.33% on the day at $2,093/mt. It is likely to attempt to climb above the $2,100/mt level today. The most-liquid SHFE October contract tracked its LME counterpart, and increased steadily to highs around 17,290 yuan/mt, ending up 0.9% at 17,310 yuan/mt. Fund optimism may expand upward room in the contract, but investors should remain cautious about prices pulling back from highs. 

Tin: Despite lower LME inventories, three-month LME tin extended declines overnight and hit a low of $15,565/mt, before it rebounded and ended at $15,740/mt, down 1.13% on the day. The most-liquid SHFE 2001 contract pulled back after climbed to a high of 128,790 yuan/mt, ending down 0.12% on the day at 128,560 yuan/mt. Support below is seen from 128,000 yuan/mt, or 127,000 yuan/mt today, and support for LME tin is likely at $15,500/mt.