SMM Evening Comments (Mar 7)

SHANGHAI, Mar 7 (SMM) – SHFE base metals, except for lead, closed lower on Thursday. Nickel saw the biggest loss of some 1.7%, zinc dropped close to 0.9%, aluminium fell nearly 0.6%, copper slid 0.5% and tin lost about 0.4%.

The ferrous complex, except for coking coal, rebounded. Rebar climbed over 1.1%, iron ore advanced 0.7%, coke rose 0.2% and hot-rolled coil inched up 0.1%.

Copper: As longs covered their positions, the most active SHFE May copper contract extended overnight losses during the day, falling below the 20-day moving average, to close 0.51% lower at 49,210 yuan/mt. This prompted the contract to post a four-day losing streak, with the five-day moving average downwardly crossing the 10-day one, suggesting weaker support. The contract is expected to try to hang on above the 49,000 yuan/mt level tonight.

Aluminium: The most liquid SHFE May aluminium contract pared some earlier losses to close the trading day 0.59% lower at 13,480 yuan/mt. SMM data showed that social inventories of primary aluminium ingots in China saw a smaller gain of 5,000 mt this week, suggesting recovering downstream consumption. SHFE aluminium has yet to find a direction in the face of anticipated cost decline, consumption recovery and tax cuts.

Zinc: The SHFE April contract failed to hold onto overnight grounds and slid during the day, closing 0.86% lower at 21,825 yuan/mt. With high domestic inventories, the liquidation of long positions mainly accounted for the decline in SHFE zinc on the day. Its LME counterpart climbed in the morning of European trading hours, which is likely to shore up SHFE zinc tonight.

Nickel: SHFE nickel fell sharply during the day, dragged by news of new smelting capacity coming online in China and Indonesia. The most traded SHFE May nickel contract declined 1.71% to finish the trading day at 104,110 yuan/mt. It is reported that Delong’s project in Indonesia has got its 11th rotary kiln-electric furnace (RKEF) ignited and the project is likely to wholly come online in June. For Shandong Xinhai, its four newly-commissioned 48,000-KVA RKEFs have reportedly seen output as of March 6, which is estimated to grow ferronickel production by 28,000-32,000 mt per month.  

Lead: The most liquid SHFE April lead contract traded rangebound in a wide range during the day and closed 0.14% higher at 17,575 yuan/mt. It continued to hover at highs, with shorts and longs diverging at the 17,500 yuan/mt level. The contract is expected to remain within this range in the near term.

Tin: The most active SHFE May tin contract traded in a wider range of about 500 yuan/mt around the 148,500 yuan/mt level during the day. It closed the trading day 0.36% lower at 148,540 yuan/mt. Support is seen at 147,500 yuan/mt while resistance is at 150,000 yuan/mt.