SMM Evening Comments (Feb 18)

SHANGHAI, Feb 18 (SMM) – The US-China trade hopes and gains in China’s stock markets buoyed SHFE base metals on Monday February 18. Copper led the increase and closed 1.82% higher, zinc grew 1.23%, nickel jumped 0.93%, aluminum rose 0.67%, lead went up 0.65%, and tin gained 0.40%.

The ferrous complex also settled higher as hot-rolled coil increased by 1.6%. Coke climbed 0.39%, and rebar went up 0.66%. 

Copper: The SHFE 1904 contract climbed up after opening and hit almost the highest in two months, at 49,260 yuan/mt, in the afternoon as investors added their longs. It ended at 49,230 yan/mt, with open interests up 38,032 lots to 222,000 lots. Open interests in all SHFE copper contracts accumulated 13,180 lots to 627,000 lots, with longs accounting for the majority. This led to an influx of some 439 million yuan of capitals in all SHFE copper contracts, topping base metals. With strong support at the five-day moving average, the 1904 contract is likely to test pressure at the 49,300 yuan/mt level tonight. 

Aluminium: Improved macroeconomic sentiment lifted the SHFE 1903 contract from a low of 13,420 yuan/mt in early trades, to an intraday high of 13,475 yuan/mt near closing. It closed at 13,460 yuan/mt with the KDJ indicators expanding upwards and the MACD red line lengthening. We expect it to continue to test support at the 10-day moving average tonight. 

Zinc: Optimism around macro development grew confidence in longs, and this rallied the SHFE 1904 contract above the daily moving average at noon. However, growing inventories capped the increase and ended the contract at 21,425 yuan/mt. Open interests rose 21,480 lots to 194,000 lots. A weaker LME zinc is likely to weigh the 1904 contract, and see it testing support at the five-day moving average tonight. 

Nickel: Low-level inventories of nickel and resumption of downstream buyers supported prices of the SHFE 1905 contract, which stemmed their declines at 97,520 yuan/mt. Growing longs in the afternoon buoyed the contract to around 98,400 yuan/mt, and ended it at 98,390 yuan/mt. Open interests in the contract declined 10,000 lots to 297,000 lots. As the KDJ indicators expanded downwards and the MACD red line shortened, the contract is likely to test support at the five-day moving average tonight. 

Lead: The SHFE 1903 contract hovered below the daily moving average with an intraday low of 16,925 yuan/mt. Pressure at the 10-day moving average limited its upward room. Tonight, it is expected to test resistance at the 10-day moving average, with support at the five-day moving average. 

Tin: A stronger LME tin and higher SHFE base metal contract pulled the SHFE 1905 contract above the daily moving average, after it dipped below that level to lows around 148,700 yuan/mt before noon. It settled at 149,090 yuan/mt with open interests up 818 lots to 31,746 lots. Currently at the five- and 20-day moving averages, the contract is expected to test resistance at 150,000 yuan/mt in the short run.