SMM Evening Comments (Oct 24)

SHANGHAI, Oct 24 (SMM) – SHFE nonferrous contracts closed mixed while the ferrous complex rose across the board on Wednesday. 

SHFE zinc led gains and jumped 1.74%, aluminium grew 0.56%, lead settled flat, while copper lost 0.12%, nickel fell 0.13%, and tin dipped 0.07%.   

Iron ore surged 2.68%, coke rose 2.61%, coking coal increased 1.05%, hot-rolled coil gained 0.95%, and rebar went up 0.87%. 

Copper: The SHFE 1812 contract received support after it twice fell to a low of 50,060 yuan/mt in the morning. As investors added their longs, the contract climbed in the afternoon to a high of 50,400 yuan/mt, and settled at 50,330 yuan/mt. This remained below the five- and 10-day moving averages. Open interests accumulated 5,732 lots while that of the SHFE November contract fell 20,724 lots. The dominant 1812 contract is likely to test pressure at 50,500 yuan/mt in the short run. 

Aluminium: The SHFE 1812 contract extended its buoyant trend overnight as it registered a fourth consecutive day of increase, and settled at 14,250 yuan/mt. Open interests lost 8,440 lots to 230,000 lots. The contract is expected to continue to test pressure above at the 10-day moving average tonight. 

Zinc: Confidence across longs grew as LME zinc rose. This supported the SHFE 1812 contract to surge to an intraday high of 22,575 yuan/mt. The contract grew 650 yuan/mt from Tuesday to close at 22,540 yuan/mt. Open interests gained 21,682 lots. Further upward momentum is expected tonight. 

Nickel: A weakened LME nickel dragged the SHFE 1901 contract to a low of 102,520 yuan/mt before noon. It then rebounded but faced pressure at the 20-day moving average, closing at 103,230 yuan/mt. Open interests edged down 3,000 lots to 270,000 lots. As the KDJ indicators expanded upwards and the MACD red line lengthened, we expect the contract to hover around 103,000 yuan/mt tonight. Key data to monitor tonight include the US weekly MBA mortgage applications, its Markit manufacturing purchasing managers' index (PMI), new house sales for September, and weekly changes in oil stocks. 

Lead: A robust SHFE zinc pulled the SHFE 1812 contract to an intraday high of 18,310 yuan/mt in the afternoon. As some longs took profits and left, the contract came off to close at 18,150 yuan/mt, around the Bollinger middle band. Despite heavy pressure above, the 18,000 yuan/mt level provided effective support. The contract is likely to test resistance at 10-day moving average with support at the 40-day moving average. 

Tin: The SHFE 1901 contract traded rangebound around 147,800 yuan/mt after it dipped from a high of 148,390 yuan/mt in the morning. It closed at 147,800 yuan/mt with open interests up 246 lots. We expect that limited support from fundamentals will extend the contract's rangebound trend tonight.