SMM Evening Comments (Aug 1)

SHANGHAI, Aug 1 (SMM) – Nonferrous metals saw mixed trading on Wednesday August 1. SHFE zinc gained nearly 1.3%, nickel rose 0.48%, copper nudged up, while aluminium lost 0.48%, tin fell 0.62%, and lead dropped over 1%.

The ferrous complex, except for coke, dipped across the board as iron ore led the losses and closed nearly 2.6% lower. Rebar and hot-rolled coil fell almost 0.4%, and coking coal went down nearly 1.7%.

Copper: The SHFE 1809 contract hovered around 49,985 yuan/mt this morning, and declined in the afternoon as shorts increased. It fell to a low of 49,810 yuan/mt and closed at 49,820 yuan/mt, 40 yuan/mt higher from Tuesday. Open interests fell 6,618 lots to 166,000 lots while that of SHFE 1810 and 1811 increased over 7,000 lots. Market sentiment will receive a boost if US-Sino trade talks progress well. The contract is likely to test support at the five-day moving average tonight. Investors would take more guidance tonight from Europe's purchasing managers' index (PMI) in July, the US ADP payrolls and Markit's manufacturing PMI for July. 

Aluminium: While the SHFE 1809 contract dipped with pressure at 14,500 yuan/mt, it continued to stand firm above the five-day moving average. It consolidated around the 60-day moving average and closed at 14,430 yuan/mt, down 70 yuan/mt from July 31. Investors would take guidance from the movement of LME aluminium prices tonight. 

Zinc: The SHFE 1809 contract failed to sustain its upward momentum from last night and dipped to lows around 21,480 yuan/mt in the morning. While it faced heavy pressure at the Bollinger middle band, the five- and 10-day moving averages provided support. We forecast it to test support at those levels again tonight. 

Nickel: Upbeat Chinese PMI data bolstered the SHFE 1809 contract. The contract climbed to a high of 114,210 yuan/mt after opening, the highest level in two weeks. It inched down as longs exited in the afternoon. However, with support at 113,000 yuan/mt, the contract gained 540 yuan/mt from Tuesday and closed at 113,209 yuan/mt. We expect it to consolidate at the 113,300 yuan/mt level tonight. 

Lead: Amid bearish sentiment, the SHFE 1809 contract lost accumulative gains from last week, with heavy pressure at the five- and 10-day moving averages. Rising shorts grew 472 lots in the open interests, to 67,556 lots. The contract is likely to continue its weak trend tonight.

Tin: As longs took profits and left, the SHFE 1809 contract tumbled to a low of 146,720 yuan/mt, above the interesectiong of the five- and 60-day moving averages. It lost 1,010 yuan/mt from Tuesday to close at 147,090 yuan/mt, with open interests down 1,084 lots to 23,578 lots. We see support at 145,000 yuan/mt in the short run.