SMM Morning Comments (Aug 10)

SHANGHAI, Aug 10 (SMM) –

Copper: Copper prices came off from early highs overnight as market sentiment was depressed by the strengthening dollar. LME copper hit the $6,300/mt level but closed near $6,200/mt; the SHFE 1810 contract jumped past the 50,000 yuan/mt level but closed near 49,850 yuan/mt. We expect copper prices to rise in the short term, but the upward room would be limited. LME copper is likely to trade at $6,180-6,240/mt today and the SHFE 1810 contract at 49,600-50,100 yuan/mt. Spot premiums are seen lower at 10-50 yuan/mt.

Aluminium: With a strong dollar, LME aluminium plunged to a low of $2,068.5/mt and closed at $2,069/mt on Thursday. The SHFE 1810 contract fell overnight, touching a low of 14,585 yuan/mt as longs covered their positions. The impact of strikes at Alcoa’s alumina refinery in Western Australia was smaller than expected as the company is said to be hiring temporary workers. We expect LME aluminium to trade rangebound at $2,070-2,090/mt today with the SHFE 1810 contract at 14,600-14,800 yuan/mt. Spot discounts are seen at 50-10 yuan/mt.

Zinc: LME zinc came off from a high of $2,673/mt due to a rapid rise in the dollar and closed slightly lower at $2,598/mt on Thursday. The bearish sentiment is likely to ease today and the contract is expected to hover around the middle Bollinger band, at $2,580-2,630/mt. The SHFE 1810 contract tumbled to a low of 21,510 yuan/mt overnight after open. With some technical support, it reversed some losses and settled at 21,545 yuan/mt. We expect it to trade rangebound at 21,400-21,900 yuan/mt today.

Nickel: LME nickel fell sharply to a low of $13,845/mt on a strengthened US dollar. It closed over 1% lower from Wednesday at $13,905/mt. We see it hovering around $13,800/mt today with continued pressure at the 40-day moving average today. The SHFE 1811 contract diverged gradually from the daily moving average to a low of 113,340 yuan/mt. It then stopped falling and closed at 113,770 yuan/mt. Limited upward momentum is seen for the contract, which is likely to trade at 113,000-114,500 yuan/mt today. Spot prices are set at 112,800-115,000 yuan/mt.

Lead: LME lead lost all the gains it made within this week and closed at $2,108/mt on Thursday, though a 1,550-mt decline in LME inventory pushed it up to $2,167.5/mt at one point. Pressure is seen at several moving averages and the contract today is likely to test support at $2,100/mt. The weak LME lead also dragged its SHFE counterpart down. The SHFE 1809 contract tumbled, touching a low of 18,265 yuan/mt, and closed at 18,305 yuan/mt overnight. It is likely to recover some losses today with support at the 10-day moving average.

Tin: LME tin hovered around the five-day moving average with pressure as the US dollar gained. The SHFE 1809 contract also traded weakly around the 60-day moving average. Resistance above will be at 149,000 yuan/mt today.