SMM Evening Comments (Nov 6)

SHANGHAI, Nov 6 (SMM) – SHFE base metals ended the trading day in mixed performance with the biggest losses by lead, down close to 1.7%. Copper slid close to 0.7% and zinc edged down 0.07% while nickel gained close to 0.3% and tin nudged up 0.03%. Aluminium stayed flat.

The ferrous complex also traded mixed. Rebar fell close to 1%, hot-rolled coil dropped 0.8% and iron ore dipped 0.1% while coke increased by 1.33% and coking coal edged up 0.04%.

Copper: Tracking losses in its LME counterpart, the SHFE 1901 contract fell to the day’s lows of 49,480 yuan/mt before it rebounded to close near its opening price. The contract stood between the middle and lower Bollinger bands with support at the 10-day moving average. Its MACD green line shortened while KDJ lines diverged and expanded upwards. Market participants should monitor whether the SHFE 1901 contract could regain ground at 50,000 yuan/mt tonight.

Aluminium: The January contract became the most-traded SHFE aluminium contract today. While the contract gained and traded above the day moving average, it failed to recover all the losses from the previous day. The contract traded in a tight range during the daytime trading hours and is expected to test the five-day moving average tonight.

Zinc: After initial dips on long-covering, the SHFE 1901 contract climbed to the day’s highs of 21,320 yuan/mt, near the five-day moving average, before it edged down to close below the flat line. This helped the contract regain most losses made in the previous day. Low inventories are expected to continue into the near term with limited seaborne materials entering in a closed arbitrage import window. This is set to provide some support to SHFE zinc prices. The SHFE 1901 contract is expected to test resistance at the five-day moving average tonight.

Nickel: On short-covering, the SHFE 1901 climbed to finish the trading day in the black. Open interest for the contract decreased by 26,260 lots to 304,420 lots. Its KDJ lines diverged and expanded upwards while MACD green line shortened. The contract is expected to try to stand firmly above the lower Bollinger band tonight.

Lead: The SHFE 1901 contract initially tumbled past the 10-day moving average today and stemmed the decline at 18,490 yuan/mt. It then traded within a narrow range around that level before it extended its losses to close at 18,420 yuan/mt. Open interest for the contract shrank 3,570 lots to 50,836 lots. Several moving averages temporarily halted their uptrends and this indicated that the contract has headed into a correction. But low stocks across social warehouses and Shanghai-bonded areas are likely to limit the downside room in SHFE lead. The SHFE 1812 contract is likely to continue its weak performance tonight.

Tin: As longs added and shorts cut their positions, the SHFE 1901 contract reversed its weak performance overnight and crept to close near the day’s highs of 145,980 yuan/mt. This helped it regain ground at the five-day moving average. With limited supplies across physical markets, the contract is likely to continue its firm performance tonight with resistance at 147,000 yuan/mt.