SMM Evening Comments (May 31)

SHANGHAI, May 31 (SMM) – Most nonferrous metals rose on Thursday May 31. SHFE nickel surged 2.5% and registered a three-year high of 114,680 yuan/mt. SHFE zinc gained 1.5% with lead and copper slightly up. SHFE aluminium lost 0.78% and tin dipped.

The ferrous complex rose across the board. Coking coal jumped 2.4%, coke rose 1.7%, rebar gained 1.5%, hot-rolled coil inched up close to 1% and iron ore edged up.

Copper: The SHFE 1807 contract rose from open lows during the day and recovered some previous losses. Many shorts left the market with open interest sharply down 14,000 lots. We see several moving averages above the contract. We expect it to test the support at the 51,250 yuan/mt level tonight.

Aluminium: As shorts flooded the market, the SHFE 1807 contract tumbled to a low of 14,635 yuan/mt today. We see the contract remaining rangebound given a lack of new developments for directions. High prices of alumina will provide some support but there will be pressure as consumption remains at current levels. The contract's trading level fell as the five-, 10- and 20-day moving averages above moved closer to one another. We expect SHFE aluminium to move between the 40- and 20-day moving averages tonight.  

Zinc: The SHFE 1807 contract fell twice in the morning but rebounded with support from the daily moving average. As longs entered the market and shorts closed out their positions, the contract saw its trading level rise and consolidated around the 24,400 yuan/mt in the afternoon. It hit a high of 24,465 yuan/mt. The contract stood firmly above the 60-day moving average and the upper Bollinger band. We expect it to climb towards the 24,500 yuan/mt level.

Nickel: Given high downstream consumption for stainless steel, the SHFE 1807 contract surged to a three year high of 114,870 yuan/mt as investors cut their shorts and added longs. As the KDJ indicators expanded upwards and the longer-term moving average of the MACD lengthened, the contract is likely to strengthen further tonight. Investors will take more cues from the US weekly initial jobless claims, and its personal consumption expenditure (PCE) price index in April.

Lead: The SHFE 1807 contract hovered around the daily moving average during the day after it hit a high of 20,115 yuan/mt. As LME lead inventories shrank 650 mt and the US dollar weakened, LME lead may climb up tonight and bolster its SHFE counterpart.

Tin: With open interest up sharply, the SHFE 1809 contract hovered around the 155,000 yuan/mt level during the day. Momentum in the spot market was limited and it failed to follow such brisk trading pattern. Downstream consumers and hedgers kept on the sidelines. We expect the SHFE tin to remain at highs in the short term with resistance at the 157,500 yuan/mt level.