SMM Evening Comments (Feb 12)

SHANGHAI, Feb 12 (SMM) – A robust US dollar depressed SHFE base metals on February 12 as nickel and zinc led the losses and closed over 1% lower. Lead fell 0.74%, copper dipped 0.52%, aluminium and tin edged down. 

The ferrous complex, except for coking coal, also traded lower. Iron ore lost more than 2%. Hot-rolled coil, rebar, and coke slid over 1%.

Copper: Concerns about US-China trade talks grew shorts, and limited gains in the SHFE 1903 contract. As longs also exited the market, the contract declined to an intraday low of 48,060 yuan/mt near closing, and ended at 48,110 yuan/mt. Open interests shrank 506 lots to 167,000 lots, while open interests in all SHFE copper contracts gained 11,598 lots, with shorts accounting for the majority. We expect the 1903 contract to test support at the five-day moving average, or the 48,050 yuan/mt level tonight. 

Aluminium: The SHFE 1903 contract traded rangebound and dipped to an intraday low of 13,345 yuan/mt in the afternoon, pressured by a higher US dollar and domestic sluggish fundamentals. It closed at 13,365 yuan/mt with open interests up 6,746 lots to 245,000 lots. The KDJ indicators expanded downwards and the MACD red line shortened. Downstream consumption is unlikely to resume quickly in the short run, and this will extend the weak trend in the contract. 

Zinc: The SHFE 1903 contract received support twice at 21,540 yuan/mt after it unsuccessfully tested pressure at the daily moving average. A stronger LME zinc pulled its SHFE counterpart, to break the daily moving average and end at 21,620 yuan/mt. As shorts still dominated the market when consumption only picked up moderately, the 1903 contract is likely to hover weakly below the 10-day moving average tonight. 

Nickel: The SHFE 1905 contract was dragged by weakened prices of ferrous complex, to below the 99,000 yuan/mt level in the morning. Traders took profits and left after concerns waned that Brazilian miner Vale could be forced to curtail nickel supply. Pressure above from 99,200 yuan/mt again lowered the contract below the daily moving average near closing, and ended it at 99,180 yuan/mt. Open interests rose 12,000 lots to 288,000 lots. As the KDJ indicators expanded downwards and the MACD red line shortened, the contract is expected to test support at the five-day moving average tonight. 

Lead: The SHFE 1903 contract hovered below the daily moving average and showed signs of slower decline today. It ended at 16,800 yuan/mt with an intraday low at 16,795 yuan/mt near noon. Open interests accumulated 1,180 lots to 45,044 lots. The contract is likely to recover part of the previous losses in the short run. 

Tin: The SHFE 1905 contract consolidated around 150,000 yuan/mt today with the highest level above the daily moving average as shorts exited near noon. It closed 620 yuan/mt lower on the day at 149,880 yuan/mt.