SMM Morning Comments (Sep 7)

SHANGHAI, Sept 7 (SMM) –

Copper: LME copper failed to extend its gains at the $5,988/mt level when it tested resistance at $6,000/mt above. It will attempt to stand firm above $5,900/mt today. The yuan appreciated and bolstered the SHFE 1811 contract to close 210 yuan/mt higher at 47,810 yuan/mt. However, concerns of China’s tough stance on trade disputes with the US continue to weigh on investors and the market. High spot premiums are unlikely to sustain with the opening of the import window. Demand in the current high season will provide some support to premiums, which are expected at 60-110 yuan/mt today.

Aluminium: After Alunorte signed agreements to resume operations at the alumina refinery in Brazil, LME aluminium fell sharply to a low of $2,035/mt, and closed at $2,046/mt. It is expected to slow its decline and trade at $2,035-2,060/mt today. A lower LME aluminium dragged down its SHFE counterparts overnight. As shorts surged, open interests across all SHFE aluminium contracts grew 5,880 lots. The 40- and 60-day moving averages below may provide support in the short run. We expect the 1811 contract to trade at 14,550-14,680 yuan/mt today with spot discounts up to 40 yuan/mt.

Zinc: LME zinc failed to stand firmly above the 10-day moving average after it broke resistance at the 20-day moving average and initially rose to $2,463/mt. With much resistance at the five- and 10-day moving averages above, it is seen trading at $2,420-2,470/mt today. The SHFE 1811 contract increased to a high of 20,880 yuan/mt after it jumped above the 10-day moving average. With pressure at the 40-day moving average above, the contract will consolidate at 20,500-21,000 yuan/mt today.

Nickel: LME nickel failed to break pressure at the five-day moving average, and closed at $12,470/mt overnight. Inventory across LME warehouses shrank 324 mt to 236,706 mt. The SHFE 1811 contract also traded weakly with resistance above at 103,500 yuan/mt. Although the US dollar weakened, longs entered the market cautiously on concerns over potential US tariffs on $200 billion worth of Chinese goods. Today, LME nickel is expected to trade around $12,500/mt with the SHFE contract at 102,000-103,500 yuan/mt. Spot prices are likely seen at 102,500-108,500 yuan/mt.

Lead: LME lead plunged to a low of $2,025.5/mt as longs exited, after it a weaker US dollar bolstered it. It closed at $2,043/mt, marking the third consecutive day of decline. The SHFE 1810 contract surged near closing with buoyance from longs. It settled 0.32% higher at 18,655 yuan/mt, and may stay firm today.

Tin: LME tin climbed during the European trading period and closed at $18,830/mt on Thursday. We expect it to remain rangebound in the short term with support at $18,300/mt. The SHFE 1901 contract consolidated under the five-day moving average overnight. We expect it to trade under pressure today with a trading range of 143,000-144,500 yuan/mt.