SMM Evening Comments (Sep 11)

SHANGHAI, Sep 11 (SMM) – SHFE nonferrous metals closed mixed on Wednesday. Zinc was the best performer, with a gain of 1.3%. Nickel rose 0.5%, and aluminium advanced 0.2%, while copper, lead and tin lost about 0.2%.

The ferrous complex also saw mixed performance. Iron ore, coking coal and coke climbed for a third straight day, up 1.5%, 0.9% and 0.9%, respectively. Rebar shed 0.1%, and hot-rolled coil declined 0.4%.

Copper: The most active SHFE 1911 contract recovered from earlier losses to end the day 0.21% lower at 47,290 yuan/mt. The discount for the 1909 contract against 1910 contract narrowed to zero on the day. SHFE copper was confined to a range of 150 yuan/mt during the day and held at the 47,300 yuan/mt level, as investors looked ahead to the ECB and Fed meetings as well as the US dollar’s reaction to the monetary policy decisions. On the technical front, pressure from the five-day moving average and shortened MACD red bar indicated limited upside momentum in SHFE copper. The contract is likely to take cues from the London market tonight.

Aluminium: As shorts took profits and longs added positions, the most traded SHFE 1911 contract crept up to an intraday high of 14,425 yuan/mt, before it closed 0.24% higher at 14,415 yuan/mt. SHFE aluminium strengthened in a high consumption season. It is expected to test the 14,500 yuan/mt level, if SMM data due on Thursday show a substantial weekly decline in social inventories of primary aluminium.

Zinc: As longs flocked to the market, the most active SHFE 1911 contract rapidly climbed to the highest in more than a month, at 19,305 yuan/mt, before it finished the trading day 1.26% higher at 19,265 yuan/mt. SHFE zinc moved around the upper Bollinger band during the day. Investors trimmed their short positions on the 1909 and 1910 contracts, and built long positions on the 1911 contract. This suggested market optimism about future consumption. Open interest for 1909-10 contracts shrank close to 5,000 lots on the day. SHFE zinc is expected to continue to move around the upper Bollinger band tonight.

Nickel: The load-up of long positions bolstered the most traded SHFE 1911 contract in afternoon trade, lifting it from an intraday low of 141,850 yuan/mt to close 0.53% higher at 144,000 yuan/mt. SHFE nickel generally hovered around the daily moving average on the day. Resistance at the 145,000 yuan/mt level will come under scrutiny tonight.

Lead: The most active SHFE 1910 contract fell to an intraday low of 17,305 yuan/mt in morning trade, as longs exited on wider secondary lead spreads. It later recovered some ground to end the day 0.23% lower at 17,365 yuan/mt, suggesting strong support at the 17,300 yuan/mt handle. Morale among longs eased with no announcement of production restrictions and on wider discounts for secondary lead against primary materials. Chinese authorities are widely expected to require polluting enterprises to cut production or suspend in the run-up to the National Day holiday at the start of October. SHFE lead is expected to remain weak tonight, but with limited downside room.

Tin: The most traded SHFE 2001 contract weakened to an intraday low of 139,310 yuan/mt, before it clawed back some losses to end the day 0.22% lower at 139,850 yuan/mt. Open interest for the contract further shrank, down 560 lots on the day. Support is seen at 138,000 yuan/mt.