SMM Morning Comments (Aug 3)

SHANGHAI, Aug 3 (SMM) –

Copper: LME copper rebounded above $6,100/mt and closed at $6,139/mt after it fell to $6,068/mt on Thursday. The SHFE 1809 contract inched up and closed at 49,200 yuan/mt level overnight, near its 20-day moving average. Copper prices face strong pressure from the US-China trade disputes and a slowdown in Chinese economic growth. Bearish sentiment prevails in the market despite potential strikes at Escondida and low levels of LME and SHFE inventory that could provide support to copper prices. We expect LME copper to trade at $6,080-6,140/mt today with the SHFE 1809 contract at 48,900-49,400 yuan/mt. Spot premiums are seen at 40-80 yuan/mt.

Aluminium: LME aluminium dipped on Thursday and is likely to trade at $2,030-2,060/mt today. The SHFE 1809 contract opened lower after an initial gain and closed at 14,415 yuan/mt overnight. Rebounding prices of prebaked anode and expected production cuts provided support for the upward correction, but pressure from US-China trade disputes lingers. We expect the SHFE 1809 contract to trade at 14,350-14,450 yuan/mt with spot discounts at 80-40 yuan/mt.

Zinc: LME zinc climbed up to $2,587.5/mt from initial, moderate losses but edged down and consolidated around $2,565/mt with pressure at the 20-day moving average on Thursday. We expect it to trade at $2,550-2,600/mt today. The SHFE 1809 contract rose to a high of 21,520 yuan/mt before it consolidated around 21,450 yuan/mt overnight. The five- and 10-day moving averages below the contract adhered to each other and created some support. We expect it to trade at 21,300-21,800 yuan/mt today.

Nickel: LME nickel closed slightly lower on Thursday. The SHFE 1809 contract opened lower and weakened overnight. It lost the gains it made in two weeks. With weak downstream demand in August and as nickel pig iron production recovers, we expect LME nickel to weaken and hover around $13,300/mt today with the SHFE 1809 contract at 109,000-110,500 yuan/mt. Spot prices are seen at 109,500-111,000 yuan/mt.

Lead: As the US dollar rebounded above 95, LME lead dipped to a low of $2,112.5/mt, losing nearly all the overnight gains on Thursday. Uncertainty in the macroeconomy also weighed on LME lead prices. The SHFE 1809 contract fell to the lowest level in close to three months at 18,070 yuan/mt amid pessimism sentiment. It is likely to test support at 18,000 yuan/mt in the short run.

Tin: As the US dollar strengthened, LME tin fell below the support of all moving averages and closed at a low of $19,600/mt, some $150/mt lower from Wednesday. It is expected to retain its weak trend in the short term with support at $19,300/mt. A weaker LME tin and sluggish domestic demand depressed the SHFE 1809 contract to a low of 146,620 yuan/mt. Support is seen at 145,000 yuan/mt today.