SMM Morning Comments (Jul 30)

SHANGHAI, Jul 30 (SMM) –

Copper: Copper prices rebounded overnight, with the most active SHFE September contract advancing 0.81% to end at 47,270 yuan/mt. Three-month LME copper broke $6,000/mt to finish its trading day 0.82% higher at $6,015/mt. Open interest for the SHFE copper complex shrank 3,362 lots to 572,000 lots, with short-covering accounting for the majority. Any positive developments from the US-China trade talks which are set to resume today will give a boost to copper prices, but poor fundamentals will limit upside room. Overnight gains helped SHFE copper stem its recent declines. The contract is expected to trade between 47,000-47,500 yuan/mt today, with LME copper at $6,000-6,040/mt. Spot premiums are seen up to 50 yuan/mt as higher prices of futures will likely improve willingness among traders to lower offers.

Aluminium: Three-month LME aluminium recovered from earlier losses to close 0.44% higher at $1,814.5/mt on Monday. It is expected to trade at $1,790-1,830/mt today. As longs loaded up their positions, the most traded SHFE September contract rose to 13,950 yuan/mt overnight before it closed 0.5% higher at 13,940 yuan/mt. Aluminium prices remained firm overnight, despite a robust US dollar. SHFE aluminium is expected to trade between 13,840-14,000 yuan/mt today, with spot prices in a discount of 20 yuan/mt to a premium of 20 yuan/mt.

Zinc: Three-month LME zinc rose for a second straight day to a high of $2,480/mt on Monday, before it finished its trading day 0.78% higher at $2,460/mt. The return to backwardation on LME zinc and lower LME inventories both pointed to tighter supplies, which will grow morale among longs. But resistance is strong from the 40-day moving average. LME zinc is expected to trade between $2,430-2,480/mt today. A firmer LME zinc bolstered the most active SHFE September contract overnight, which climbed to a high of 19,640 yuan/mt before closing 0.85% higher at 19,540 yuan/mt. This marked the second straight day of gains in SHFE zinc. However, strong resistance at the 40-day moving average and expectations of an inventory rebound will weigh. SHFE zinc is expected to trade between 19,300-19,800 yuan/mt today.

Nickel: Three-month LME nickel fell to a nearly two-week low of $13,885/mt on Monday before it sharply rebounded to finish its trading day 1.52% higher at $14,350/mt. Whether it could shrug off resistance from the 10-day moving average and remain firm above the five-day one is crucial to watch today. The load-up of long positions pushed SHFE nickel up overnight, with the most traded SHFE October contract rallying 2.03% to end at 112,540 yuan/mt. Whether SHFE nickel could remain above the five-day moving average and the 111,000 yuan/mt level is crucial to watch today.

Lead: Three-month LME lead continued its pull-back to a low of $2,027/mt on Monday, before its recovered some ground to close 0.89% lower at $2,056.5/mt. It is expected to remain rangebound at highs in the short run, with support from the 10-day moving average. A weaker LME lead knocked the most active SHFE September contract to open lower overnight, which, however, rallied above the five- and 10-day moving averages to end 0.24% higher at 16,730 yuan/mt. The 10-day moving average will provide brief support to SHFE lead, which has outperformed its LME counterpart, and created arbitrage opportunities.

Tin: Three-month LME tin extended its declines to a low of $17,545/mt on Monday, before it clawed back some losses to close the trading day 0.37% lower at $17,590/mt. A previous low of $17,500/mt will continue to provide support. The most traded SHFE September contract tumbled to a low of 133,620 yuan/mt shortly after overnight’s opening bell, before it recovered some ground to end 0.12% lower at 134,230 yuan/mt. Resistance is seen at 136,000 yuan/mt, while support is at 134,000 yuan/mt.