SMM Evening Comments (Jul 4)

SHANGHAI, Jul 4 (SMM) – SHFE nonferrous metals, except for zinc, closed higher on Thursday. Tin rebounded 1.9%, aluminium advanced 0.9%, nickel climbed 0.6%, lead gained 0.5% and copper nudged up 0.04%.

The ferrous complex, except for coke, traded lower. Iron ore snapped a five-day winning streak and declined 3.8%, coking coal and rebar fell 0.5%, and hot-rolled coil shed 0.3%.

Copper: The most active SHFE August contract erased gains from overnight and early morning trade to close the trading day a tad higher at 46,350 yuan/mt. Open interest for SHFE copper contracts complex shrank 11,638 lots on the day, with 165 million yuan fleeing the market. Sluggish economic data from major economies around the world grew concerns about demand, as evidenced by lower oil prices even as OPEC and its allies agreed to extend production cuts. A low consumption season also added to pressure on copper prices. With limited support from technical indicators, strength at the 46,300 yuan/mt level will come under scrutiny tonight.

Aluminium: The most traded SHFE August contract extended overnight gains to finish the trading day 0.92% higher at 13,775 yuan/mt. SMM data showed that social inventories of primary aluminium ingots across major consumption regions in China continued to fall this week, which drove bargain-hunting and short-covering after four consecutive days of declines. Lower costs for alumina and anodes, as well as a low consumption in July-August will continue to weigh on SHFE aluminium.

Zinc: The September contract became the most active SHFE zinc contract today. With strong resistance from the five- and 10-day moving averages who adhere to each other, the contract fluctuated to close the trading day marginally lower at 19,515 yuan/mt. Stable MACD lines show limited upward momentum in SHFE zinc, while fundamentals will neither offer support, in anticipation of greater supply. Resistance from the 10-day moving average is under scrutiny tonight.

Nickel: The most traded SHFE August contract pared some earlier gains to end the trading day 0.61% lower at 97,820 yuan/mt, with its intraday high of 98,760 yuan/mt above the middle Bollinger band. Whether SHFE nickel could hold its ground at the 98,000 yuan/mt level is key to watch tonight.

Lead: As longs added and short trimmed their positions, the most active SHFE August contract climbed to an intraday high of 16,170 yuan/mt in afternoon trade before it ended 0.47% higher at 16,150 yuan/mt. This reflected strong support at the 16,000 yuan/mt level. A rebound in its LME counterpart will lend some support. SHFE lead is expected to trade under pressure from the 60-day moving average tonight.

Tin: The most traded SHFE September contract traded rangebound during the day, and held onto overnight gains to close the trading day 1.89% higher at 133,580 yuan/mt, snapping a six-day losing streak. The unwinding of short positions primarily accounted for today’s gains. Support is seen at 132,000 yuan/mt.