SMM Morning Comments (May 30)

SHANGHAI, May 30 (SMM) –

Copper: As shorts aggressively loaded up their positions, three-month LME copper tumbled to $5,873.5/mt, the lowest in more than four months on Wednesday before it ended 1.26% lower at $5,891/mt. The most active SHFE July contract opened lower and fluctuated to close overnight session 0.74% lower at 46,640 yuan/mt. Copper prices are more likely to decline than rise in the near term as market sentiment soured. LME copper is expected to trade between $5,870-5,920/mt today, with SHFE copper at 46,550-47,000 yuan/mt. Spot premiums are seen firmer at 30-80 yuan/mt as lower prices of futures are likely to spur purchases.

Aluminium: Despite a 23,550-mt decline in LME aluminium stocks, three-month LME aluminium declined 0.42% on Wednesday to close at $1,796/mt, as the market remained focused on greater alumina supplies. LME aluminium is expected to trade between $1,750-1,850/mt today. As longs trimmed and shorts added their positions, the most traded SHFE July contract relinquished earlier gains to finish 0.49% lower at 14,150 yuan/mt overnight. A pause in the uptrend of alumina prices, lower costs for power and coal as well as the expectations for weaker consumption in next one to two months are likely to prevent SHFE aluminium from extending its gains. It is likely to pull back in the short term, but falling inventories will limit the declines. SHFE aluminium is expected to trade between 14,100-14,200 yuan/mt today, with spot premiums of up to 30 yuan/mt over the SHFE 1906 contract.

Zinc: A strong US dollar depressed three-month LME zinc to an intraday low of $2,525/mt on Wednesday before it recovered some ground on further lower LME zinc inventories, and closed at $2,540.5/mt, down 0.72% on the day. While LME zinc inventories continued to fall, technical pressure is likely to subdue LME zinc, which is expected to hover around the five-day moving average today, with most transactions at $2,525/2,575/mt. The most traded SHFE July contract rebounded from earlier lows to end overnight 0.07% weaker at 20,635 yuan/mt. Support was at the 10-day moving average. The contract is expected to perform weakly and trade rangebound around the 10-day moving average today, with a range of 20,500-21,000 yuan/mt. Despite a wider spread between futures contracts, spot trades remained poor, which grows the expectations for an increase in social inventories.

Nickel: Three-month LME nickel slipped 0.91% to close at $12,040/mt on Wednesday. The most traded SHFE July contract traded around 98,400 yuan/mt in a tight range to close 0.5% weaker at 98,390 yuan/mt overnight.

Lead: Three-month LME lead bucked the downtrend across the nonferrous complex on Wednesday, gaining 0.58% to end at $1,823.5/mt. Support was strong at $1,800/mt. We see limited upside in LME lead, which is expected to try to stand firmly above the 20-day moving average in the short term. The most active SHFE July contract also rebounded overnight, rising 0.97% to close at 16,120 yuan/mt. Resistance was from the 20-day moving average. SHFE lead has remained rangebound between 15,800-16,300 yuan/mt since mid-May, with the fundamentals having yet to see a substantial change.

Tin: A drop in LME tin inventories, the stronger greenback and lower crude prices dragged three-month LME tin much lower on Wednesday, which dropped 1.86% to end at $18,770/mt. Support is seen at $18,500/mt for LME tin. The most liquid SHFE September contract followed its LME counterpart to open lower overnight, and closed 0.9% down at 144,350 yuan/mt. Support is seen at 143,500 yuan/mt for SHFE tin.