SMM Evening Comments (Oct 22)

SHANGHAI, Oct 22 (SMM) – SHFE nonferrous metals, except for copper, closed lower on Tuesday. Nickel led the losses with a 1.4% decline. Lead and tin fell 0.4%, zinc and aluminium shed 0.2%.

The ferrous complex, except for coke, drifted higher. Iron ore rose 0.8%, rebar advanced 0.7%, hot-rolled coil climbed 0.6%, and coking coal gained 0.2%.

Copper: The most active SHFE 1912 contract weakened on the buildup of short positions during the daytime trading hours, paring overnight gains to finish the trading day 0.11% higher at 47,120 yuan/mt. Upside potential in copper prices will be hampered by persisting uncertainty surrounding Britain’s departure from the EU. Whether SHFE copper could remain above 47,100 yuan/mt will come under scrutiny tonight.

Aluminium: The most traded SHFE 1912 contract recovered from Monday’s slide, returning above the five- and 10-day moving average to a high of 13,830 yuan/mt during daytime trading hours, before it eased to close down 0.22% at 13,795 yuan/mt. SHFE aluminium is likely to see greater volatility tonight, as traders weigh nearby robustness in consumption against supply pressure and waning cost support in the long term. The contract is expected to creep slightly higher tonight, while hovering around the five- and 10-day moving averages.

Zinc: The most active SHFE 1912 contract slid to a low of 18,865 yuan/mt during the daytime session, before it clawed back some losses on support from the 20-day moving average. It ended down 0.24% at 18,930 yuan/mt. SHFE zinc remained rangebound, with technical indicators in a bearish bias. But traders trimmed their short positions on the day, in view of improving consumption. Whether SHFE zinc could remain above the 10-day moving average will be closely watched today.

Nickel: The most traded SHFE 1912 contract weakened in seesaw trades around 126,000 yuan/mt during the daytime session, extending overnight losses to close the trading day 1.42% lower at 125,690 yuan/mt. SHFE nickel remained under the lower Bollinger band, and will try to hold onto the 125,000 yuan/mt handle tonight.

Lead: The most active SHFE 1911 contract dropped to a low of 16,870 yuan/mt during the daytime trading hours as investors reached the consensus to go short. It later recovered some ground to close the trading day 0.41% lower at 16,945 yuan/mt. SHFE lead will likely get off to a higher open tonight, in anticipation of the participation of speculative funds. With SHFE lead diverging from its LME counterpart, the ratio of SHFE lead prices to LME lead will further decline in the short term, keeping SHFE lead bearish.  

Tin: The most traded SHFE 2001 contract continued to hover in a wide range around the daily moving average during the daytime session, and finished the trading day 0.41% weaker at 137,800 yuan/mt. SHFE tin has yet to recover from Monday’s sharp pullback, with support sustained at the 20-day moving average as low as 137,000 yuan/mt.