SMM Morning Comments (Aug 13)

SHANGHAI, Aug 13 (SMM) –

Copper: Copper prices weakened overnight, as trade tensions raised concerns about global economic growth and exchange rate fluctuation and as China’s new loans dipped more than expected in July. Three-month LME copper lost 0.45% on Monday to end at $5,740.5/mt, while the most active SHFE October contract shed 0.26% to close at 46,580 yuan/mt overnight. Anemic consumption in China could not offer support, either. Copper prices are expected to remain weak and rangebound today. LME copper is likely to move between $5,730-5,770/mt, with SHFE copper at 46,500-46,800 yuan/mt. Spot premiums are seen firm at 30-70 yuan/mt, as limited inflows of seaborne materials will not ease the reluctance among sellers to lower quotes. Spot trades are likely to improve as prices of futures fell.  

Aluminium: Three-month LME aluminium followed its SHFE counterpart higher to a high of $1,793/mt on Monday, before it erased those gains to end 0.23% lower at $1,770/mt. This suggested that SHFE aluminium could provide limited traction for LME aluminium, which is likely to trade between $1,700-1,800/mt today. The most traded SHFE October contract fluctuated to end 0.89% higher at 14,150 yuan/mt overnight. Supply concerns accounted for the sharp gains in SHFE aluminium, as typhoon lashed China’s top aluminium producing hub of Shandong. SHFE aluminium is more likely to climb than decline, as it is expected to rise from a longer-term perspective. The contract is likely to trade between 14,100-14,200 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 rebounded from a low of $2,230.5/mt to finish its trading day 1.38% higher at $2,271/mt on Monday. Market focus will return to fundamentals in a trade war lull. Contango in LME zinc slightly narrowed, while LME zinc inventories extended their declines. LME zinc is expected to trade between $2,250-2,320/mt today. The most active SHFE October contract extended gains from a higher open to finish overnight session 1.27% higher at 18,725 yuan/mt. Two consecutive days of gains lifted the KDJ indicators. This, together with overnight liquidation of short positions, the absence of a substantial increase in social inventories and robust support at 18,500 yuan/mt, will bolster SHFE zinc, which is likely to trade between 18,500-19,000 yuan/mt today.

Nickel: Three-month LME nickel fell below the five- and 10-day moving averages to a low of $15,020/mt on Monday, before it recovered to finish the trading day 0.26% higher at $15,700/mt. Whether it could remain above the five-day moving average will come under scrutiny today. The most traded SHFE October contract edged down 0.11% to end at 123,170 yuan/mt overnight, but remained above the five-day moving average. Strength at the five-day moving average and resistance at the upper Bollinger band, as higher as 126,000 yuan/mt, are crucial to watch today.

Lead: Three-month LME lead eased from highs around $2,100/mt, to a low of $2,051.5/mt on Monday, before it closed its trading day 0.44% lower at $2,055/mt. The most active SHFE September contract followed its LME counterpart lower overnight, to end 0.95% down at 16,720 yuan/mt. SHFE lead’s recent rally towards 17,000 yuan/mt will come to an end, if it continues to fall today. LME lead and funds movement at 16,700 yuan/mt will provide some cues to the Shanghai market, if SHFE lead could remain above the five-day moving average.

Tin: Three-month LME tin tumbled to a low of $16,700/mt on Monday, before it clawed back all the losses to close 0.09% higher at $16,885/mt. Support is seen at $16,500/mt. The most traded SHFE September contract rose to a high of 135,060 yuan/mt overnight, before it eased to end a tad higher at 133,740 yuan/mt. Support is seen at 132,000 yuan/mt.