SMM Evening Comments (Oct 16)

SHANGHAI, Oct 16 (SMM) – SHFE nonferrous metals closed Tuesday mostly down as nickel led losses and fell 1.76%. Zinc lost 1.4%, lead declined 0.35%, copper dipped 0.75%, while aluminium increased 0.46%, and tin nudged up 0.57%. 

The ferrous complex also declined for the most part as coke slumped 1.15%, rebar dipped 0.8%, hot-rolled coil fell 0.53%, and iron ore lost 0.29%. Coking coal gained 1.26%. 

Copper: The SHFE 1811 contract lost support at the ten-day moving average as longs lost confidence. The contract slid to an intraday low of 50,130 yuan/mt in the afternoon and settled at 50,190 yuan/mt when its LME counterpart also weakened. Caution among buyers resulted in some 441 million yuan of capital leaving SHFE copper contracts. As its KDJ indicators expanded downwards and  the MACD red line shortened, the 1811 contract will test support at 50,000 yuan/mt tonight. 

Aluminium: The SHFE 1812 contract rallied after it declined overnight, and closed in the black after it rose to a high of 14,275 yuan/mt. Exiting shorts pulled up the contract, as open interest lost 5,744 lots to 222,000 lots. However, it remained below the 60-day moving average. We see it testing pressure at the five-day moving average tonight.

Zinc: Accumulated inventories and negative macroeconomic sentiment weighed the SHFE 1811 contract to below the 10-day moving average. It closed at 22,240 yuan/mt, after it slumped to an intraday low of 22,085 yuan/mt. Strong support was seen at the 22,000 yuan/mt level. We expect the contract to hover between the five- and 10-day moving averages tonight. 

Nickel: The SHFE 1901 contract led the losses among SHFE base metals as it tumbled 2,710 yuan/mt from Monday to close at 102,370 yuan/mt. It fell to month low of 101,860 yuan/mt in the afternoon. Rising supplies, weaker demand from downstream auto and stainless steel sectors accounted for the decline. Support below is set at 100,000 yuan/mt in the short run. 

Lead: As SHFE base metals fell, the SHFE 1811 contract traded weakly below the daily moving average. A lower zinc dragged the contract further in the afternoon to a low of 18,715 yuan/mt. Gains in its five- and 10-day moving averages also slowed. The contract is expected to continue its weak trend tonight. 

Tin: The 1901 contract received a boost from rising longs, and climbed to an intraday high of 147,970 yuan/mt in the afternoon. It gained 830 yuan/mt from Monday to close at 147,720 yuan/mt. Pressure above was at the 149,000 yuan/mt level. The robust trend is likely to extend tonight.