SMM Morning Comments (Jul 10)
Copper: Both LME copper and the SHFE 1809 contract rebounded but met pressure at the five-day moving average, given uncertainty from the macroeconomy. LME copper touched a high of $6,438/mt and closed at $6,405, up $96.5/mt from the previous trading day, and the SHFE 1809 contract gained 210 yuan/mt to close at 49,750 yuan/mt. We expect LME copper to trade at $6,380-6,450/mt today with the 1809 contract at 49,700-50,300 yuan/mt. Spot offers are likely to pick up as downstream restocks, standing at a discount of 10 yuan/mt to a premium of 40 yuan/mt.
Aluminium: LME aluminium registered a second consecutive day of increase last night. It stood firm above the five-day moving average, jumping to a high of $2,134.5/mt with resistance at the 10-day moving average. Its inventory across LME warehouses rose 9,275 mt to 1.12 million mt. We see it trading at $2,100-2,130/mt today. The SHFE 1809 contract was pushed up by its LME counterpart to a high of 14,230 yuan/mt, then inched down to close at 14,175 yuan/mt, with open interests up 4,308 lots to 267,720 lots. We expect it to trade rangebound at 14,050-14,250 yuan/mt today, with spot discounts at 70-30 yuan/mt.
Zinc: LME zinc lost all the gains of last Friday and closed at $2,688/mt, due to a jump in zinc inventory at LME warehouses and declined spot zinc premiums. It is seen testing support at $2,700/mt today with trading range at $2,670-2,720/mt. With insufficient upward momentum, the SHFE 1809 contract also dipped to a low of 21,740 yuan/mt, and closed 1.1% lower at 21,765 yuan/mt. The market’s bearish sentiment is likely to worsen if zinc import window opens on a stronger yuan. The contract is expected to trade weakly at 21,600-22,100 yuan/mt today.
Nickel: LME nickel rebounded to over $14,000/mt last night. The SHFE 1809 contract dipped overnight as inventory grew after the import window opened and as consumption was weak. We expect LME nickel to trade rangebound at $14,000-14,300/mt today with the SHFE 1809 contract at 110,500-112,500 yuan/mt. Spot prices are seen at 110,000-112,000 yuan/mt.
Lead: LME lead is likely to face downward pressure in the near term as market sentiment was depressed by two consecutive trading days of decline. It fell from a high of $2,371/mt, to touch a low of $2,329/mt as the US dollar swung to above 94. The SHFE 1808 contract was dragged down to a low of 19,525 yuan/mt by a falling LME lead, and closed at 19,545 yuan/mt, down 75 yuan/mt from last Friday. While most base metals gained on Monday, the contract saw limited momentum. It is likely to test support at 19,500 yuan/mt in the near term.
Tin: LME tin rose during the European trading hours overnight. It is likely to remain rangebound in the short term with pressure at the 10-day moving average. The SHFE 1809 contract consolidated around the five-day moving average overnight. The low demand season and its weak LME counterpart are set to keep the contract at current level. Resistance is seen at 145,000 yuan/mt.