SMM Morning Comments (Sep 14)

SHANGHAI, Sep 14 (SMM) – 

Copper: LME copper surged to a high of $6,074/mt and settled at $5,990/mt as the US dollar slid. In the short run, prices of the SHFE copper contracts are likely to receive support from supply shortages of copper scrap. However, we retain a cautious outlook in the medium- to long-run, given moderation in China’s economic growth and the continued threat of a trade war. Spot offers are likely to stand at a discount of 20 yuan/mt to a premium of 30 yuan/mt today. Premiums may rise after the delivery date for the SHFE September contract.

Aluminium: A lower US dollar index bolstered LME aluminium, which rose to the highest overnight at $2,080/mt within 40 minutes. Open interests increased 11,110 lots to 684,000 lots. The price is likely to consolidate at $2,030-2,070/mt today. The SHFE 1811 contract stopped its consecutive declines in the last two weeks, and settled 0.45% higher at 14,570 yuan/mt. It will continue to test pressure at the five-day moving average above, and to trade at 14,500-14,650 yuan/mt today. Spot offers are seen at a discount of 20 yuan/mt to a premium of 20 yuan/mt. 

Zinc: LME zinc failed to stand firm above the 10-day moving average for three times, pressure by tension from the macroeconomy. LME zinc inventory extended its decline and shrank 6,000 mt, but this provided limited support. We expect LME zinc to test resistance above at $2,400/mt, and to trade at $2,350-2,400/mt today. The SHFE 1811 contract was dragged down by its LME counterpart, to close 160 yuan/mt lower from Wednesday at 20,700 yuan/mt. However, the 10- and 20-day moving averages, as well as tight spot supply are likely to provide strong support below. The contract may trade at 20,700-21,200 yuan/mt today. 

Nickel: US-Sino trade disputes limited upward momentum in nickel prices, even as the US dollar weakened. Both LME nickel and the SHFE 1811 contract settled lower overnight. We expect LME nickel to consolidate around $12,600/mt with the contract trading at 103,000-105,000 yuan/mt today. Spot prices are set at 102,500-109,500 yuan/mt.   

Lead: LME lead fell to close at $2,040/mt on Thursday after it jumped to a high of $2,076/mt. The SHFE 1810 contract rebounded to end at 18,880 yuan/mt overnight after the weak performance of its LME counterpart dragged it to 18,790 yuan/mt. Traders were keen to stablise prices, with the impending delivery of the September contract. Market participants should monitorr SHFE lead coming off from highs after the delivery is completed.

Tin: LME tin hovered within a narrow range around the five-day moving average overnight. It closed higher at $19,060/mt, and may face pressure above at $19,300/mt. The SHFE 1901 contract also traded rangebound around the five- and 10-day moving averages last night. The trend is likely to continue today with support at 143,000 yuan/mt and resistance at 145,500 yuan/mt.