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SMM Morning Comments (Jul 6)


Copper: Increasing short positions depressed LME copper to a low of $6,306.5/mt amid risk aversion sentiment as the US confirmed its tariffs on $34 billion of Chinese goods would be effective on Friday. The SHFE 1809 contract also slumped to a low of 49,270 yuan/mt with declining open interests. Its trading range is expected at 49,200-49,700 yuan/mt today with that of LME copper at $6,300-6,360/mt. Market sentiment will be closely watched today. Spot offers are expected at a discount of 10 yuan/mt to a premium of 40 yuan/mt.

Aluminium: LME aluminium dipped to a low of $2,077.5/mt with pressure from the five-day moving average, after it touched a high of $2,112/mt as the US dollar weakened. It is expected to trade at $2,070-2,110/mt today. The SHFE 1809 contract consolidated around 14,060 yuan/mt and closed at that level amid watch-and-wait attitude of the market. The contract is seen trading at 13,940-14,140 yuan/mt today with spot discounts at 50-10 yuan/mt.

Zinc: LME zinc registered the fifth consecutive trading day of decline overnight amid cautious sentiment on macroeconomy. It tumbled to a low of $2,667/mt after inching up to $2,739/mt with limited upward momentum. We expect it to hover at lows of $2,670-2,720/mt today. The SHFE 1808 contract ceased its downward trend last night and closed 205 yuan/mt higher from the previous day, at 21,955 yuan/mt. However, lacking support, it is expected to trade weakly today at 21,750-22,250 yuan/mt.

Nickel: LME nickel received support at the daily moving average but failed to break pressure at the five-day one. It traded softly around $14,188/mt, and inched up to close at $14,195/mt with inventory shrinking 774 mt to 268,392 mt. The SHFE 1809 contract also closed slightly up as declining domestic inventory and steel mills resuming operations from maintenance reduce the impact of macro uncertainties. We expect LME nickel to hover at just above $14,000/mt and the SHFE 1809 contract to trade at 111,000-113,000 yuan/mt today. Spot prices are seen at 111,500-113,500 yuan/mt.

Lead: With pressure at the five-day moving average, LME lead fell to the daily moving average after hitting a high of $2,375/mt during the European trading hours. With diverging shorts and longs, the SHFE 1808 contract moved within a wide range overnight.

Tin: LME tin deepened its losses overnight and touched a low of $19,430/mt. We expect it to remain weak in the near term but with support at the $19,300/mt level. The SHFE 1809 contract traded rangebound at low levels overnight. We see support at the 142,500 yuan/mt level. However, if that level is broken, it may fall to the 140,000 yuan/mt level.