SMM Morning Comments (Sep 3)

SHANGHAI, Sep 3 (SMM) –

Copper: As the US dollar climbed above 95, LME copper fell below support at $6,000/mt while the SHFE 1811 contract stood firm above 48,000 yuan/mt. However, it will remain difficult for the contract to rise above the 20-day moving average given pressure from shorts. A weak euro, expectations of further interest rate hikes by the US Federal Reserve, and a looming trade war are likely to limit rebounds in copper prices in the short term. Spot premiums are likely to be seen at 50 yuan/mt as lower prices prompt downstream purchases.

Aluminium: LME aluminium slid after an initial gain, to a low of $2,116/mt, given a strengthened US dollar and outperformed US consumer sentiment data. Open interests increased 5,054 lots with shorts taking up the most part. Technical pressure depressed the SHFE 1811 contract down from a high of 15,010 yuan/mt. It closed at 14,910 yuan/mt. Today, trading range is set at 14,820-14,950 yuan/mt with LME aluminium at $2,105-2,135/mt. Spot discounts are seen at 60-20 yuan/mt.

Zinc: LME zinc traded with pressure as the US dollar gained, and failed to break pressure above after it rose to a high of $2,518/mt. It is likely to trade at $2,450-2,500/mt with resistance from the Bollinger middle band today. The SHFE 1810 contract fell 200 yuan/mt to close at 21,365 yuan/mt last Friday night. Tight supplies of domestic spot zinc are likely to provide some price support.  The contract is likely to trade at 21,150-21,650 yuan/mt today.

Nickel: Large amount of Norilsk nickel entered the domestic market last Friday while downstream demand rose slightly, and this lowered nickel prices. Surging shorts dragged the SHFE 1811 contract to a low around 105,000 yuan/mt. It closed at 105,090 yuan/mt with open interests up 63,000 lots to 370,000 lots. LME nickel fell sharply, after it rebounded, to the lowest in seven months below the $12,800/mt level. We expect LME nickel to hover weakly around $12,750/mt today, with the contract trading at 104,500-106,000 yuan/mt. Spot prices are likely to trade at 105,000-108,500 yuan/mt.

Lead: LME lead closed $14.5/mt higher at $2,088.5/mt, with significant pressure at the $2,100/mt level. The SHFE 1810 contract registered slower growth of 0.56% as the US dollar grew. However, further upward momentum is expected given investors’ enthusiasm.

Tin: As the US dollar strengthened, LME tin fell and closed at $18,910/mt on Friday. Support is seen at $18,600/mt. The SHFE 1901 contract tumbled and settled at 146,010 yuan/mt on Friday night. Support was seen at the 10-day moving average. With its weak LME counterpart, the SHFE 1901 contract is likely to trade rangebound under pressure today with support at 144,500 yuan/mt.