SMM Evening Comments (Nov 5)

SHANGHAI, Nov 5 (SMM) – SHFE base metals, except for copper, ended in negative territory across the board on Monday. Copper gained close to 1% while aluminium dipped 0.14%, lead fell 0.3%, tin slipped 0.6%, nickel decreased 0.8% and zinc dropped 1.27%.

The ferrous complex also broadly ended in the black with the best performance from coke gaining over 3.3%. Hot-rolled coil jumped close to 1.9%, coking coal rose by close to 1.6%, rebar and iron ore gained some 0.9%.

Copper: While the SHFE 1901 contract ended in the black, aggressive position building by shorts forced it to come off from a high open at 50,140 yuan/mt. About 243 million yuan entered the SHFE copper complex today, the most among base metals. On the technical front, the contract has jumped past the five-, 10-, 40- and 60-day moving averages to approach the middle Bollinger band. Market participants should monitor if the contract holds its ground at 50,000 yuan/mt tonight.

Aluminium: Despite a higher open, the SHFE 1901 contract fell during the day trading hours as China's services sector grew at the slowest in 13 months. This drove the contract to give up most of gains it made on Friday and finish the trading day in negative territory. We expect it to test the five-day moving average tonight.  

Zinc: As shorts built and longs covered their positions, the SHFE 1901 contract fell past 21,000 yuan/mt to close at 20,940 yuan/mt. The contract is likely to stem its declines and rebound above the 40-day moving average tonight as consecutive declines in social stocks across Shanghai, Guangdong and Tianjin may drive some shorts to take profits off the table.

Nickel: Tracking losses in its LME counterpart, the SHFE 1901 contract initially plunged past the five-day moving average today. As shorts added their positions, the contract extended its losses to the 97,000 yuan/mt level before it traded rangebound to finish the day at 97,340 yuan/mt. The SHFE 1901 contract is expected to hover around 97,000 yuan/mt tonight.

Lead: Declines in SHFE zinc and some longs taking profits lowered the SHFE 1812 lead contract to near day-lows of 18,630 yuan/mt after it climbed to a high of 18,820 yuan/mt in the morning. We expect the contract to test support at the five-day moving average tonight.

Tin: As shorts aggressively added their positions, the SHFE 1901 contract slid to a low of 145,010 yuan/mt during the day before it recovered some losses to end at 145,270 yuan/mt. Tighter supplies of ore materials appeared to have been digested by the market. The contract is expected to weaken in the short term with support at 143,500 yuan/mt.