SMM Evening Comments (May 22)

SHANGHAI, May 22 (SMM) – Nonferrous metals futures saw mixed trading on Tuesday May 22. SHFE lead continued to lead an increase of over 2%, and copper and tin edged up. SHFE zinc lost 1.3%, aluminium dropped over 1% and nickel slid close to 1%.

The ferrous complex registered another day of weak performance. Iron ore fell 2.6%, coke dropped over 2%, rebar slid over 1%, hot-rolled coil lost 0.7% and coking coal dipped.

Copper: The SHFE 1807 contract traded rangebound just below the daily moving average for the most part of the day. The SHFE copper index saw an outflow of funds of 57.9 million yuan as the market is in stalemate with both shorts and longs exiting. Technically, the SHFE 1807 contract stood above the 20-day moving average and struggled with the 60-day moving average with pressure at the 51,500 yuan/mt level. We expect it to continue to test pressure at the 51,500 yuan/mt level tonight.

Aluminium: Shorts dragged the SHFE 1807 contract down to the 14,740 yuan/mt level in the morning. The contract fell to a low of 14,595 yuan/mt under continued pressure from shorts in the afternoon. Prices of alumina declines but we see limited downward room for it. As consumption in May remains stable, we expect SHFE aluminium to trade weakly tonight. 

Zinc: As longs cut their position, the SHFE 1807 contract fell and consolidated around the 23,790 yuan/mt level in the morning. The contract extended its decline to a low of 23,580 yuan/mt in the afternoon as short positions were added and as longs fled. SHFE zinc broke support of all moving averages during the day, but we expect the decline to halt with support at the 23,500 yuan/mt level.

Nickel: The SHFE 1807 contract received support from the 10-day moving average after it dipped to 108,500 yuan/mt in the morning as the US dollar strengthened. The contract plunged near closing to a low of 108,150 yuan/mt as investors covered their long positions. We expect to see further downward room tonight with pressure from shorts.

Lead: The SHFE 1807 contract came off from highs and traded rangebound around the 19,650 yuan/mt level with a range of less than 100 yuan/mt during the day. SHFE lead gained 4.3% over the past three trading days and remains in a sharp, upward trend. It is likely to rise tonight if LME lead performs strongly.

Tin: The SHFE 1809 contract remained rangebound at high levels in the morning and dipped in the afternoon to a low of 145,660 yuan/mt. We expect it to remain rangebound in the short term with support at the 145,000 yuan/mt level.

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