SMM Morning Comments (Sep 5)

SHANGHAI, Sep 5 (SMM) –

Copper: As the US dollar gained on support from strong US ISM manufacturing data, the SHFE 1811 contract lost 650 yuan/mt to close at 46,940 yuan/mt. LME copper slumped to test support at the $5,800/mt level, and dipped to approach the Bollinger lower band. Market worries over US-Sino trade conflicts and a stronger US dollar accounted for the losses. With potential fresh tariffs from the US on $200 billion worth of Chinese goods, longs should remain cautious when they enter the market today. Spot premiums are likely at 150-200 yuan/mt today. 

Aluminium: LME aluminium inched up to a high of $2,105/mt during the Asian trading session, but a robust US dollar lowered it to a low of $2,056/mt. It closed at $2,063/mt, and may consolidate at $2,055-2,080/mt today. The SHFE 1811 contract settled at 14,710 yuan/mt after it fell to the lowest at 14,660 yuan/mt. Open interest rose 8,016 lots to 750,000 lots with shorts accounting for the majority. We expect limited downward room as prices of raw materials grow. The contract is likely to trade between 14,650-14,780 yuan/mt today, with spot discounts at 50-10 yuan/mt.

Zinc: While LME zinc inventory continued to shrink, LME zinc slumped below the $2,400/mt level with pressure form a higher US dollar. Heavy resistance was seen at the five-, 10- and 20-day moving averages above. It is expected to trade at $2,390-2,440/mt today. The SHFE 1810 contract lost support at the Bollinger middle band as its LME counterpart weakened. It is set to trade at 20,600-21,100 yuan/mt today.

Nickel: LME nickel slumped to a low of $12,375/mt as the US dollar gained. It closed at $12,490/mt and LME stock lost 510 mt to 237,984 mt. The SHFE 1811 contract received support at the 102,000 yuan/mt level after it tumbled to a low of 102,010 yuan/mt as shorts added. Market concerns over a trade war and a surge in supplies also weighed on the contract. We expect LME nickel to hover weakly around $12,500/mt, and the SHFE contract at 102,000-103,500 yuan/mt today. Spot prices are set at 102,500-108,000 yuan/mt.

Lead: LME lead settled the day 2.9% lower at $2,066/mt overnight as market concerns intensified over the trade dispute between China and the US. Base metals, expect for SHFE tin, weakened across the board, and this also depressed LME lead. The SHFE 1810 contract registered the second day of decline as it closed 1.79% at 18,650 yuan/mt. It is likely to test support at the 10-day moving average in the short run.

Tin: LME tin recovered most of its early losses and closed at $18,815/mt on Tuesday. Given the strong US dollar, we expect it to remain rangebound in the short term with support at $18,300/mt. The SHFE 1901 contract rebounded and closed at 144,820 yuan/mt overnight after it fell to 143,320 yuan/mt. Support is seen at 142,500 yuan/mt and resistance is seen at 145,500 yuan/mt.