SMM Evening Comments (Jul 7): Shanghai nonferrous metals closed mixed, Ni fell 1.29%

SHANGHAI, Jul 7 (SMM) – SHFE nonferrous metals ended mixed today amid the opinions on cracking down on illegal securities activities issued by Chinese government.

Nickel led the loss by shedding 1.29%, copper fell 0.86%, aluminium dropped 1.2%, and tin lost 0.67%, while lead rose 0.57%, and zinc went up 0.68%.

The ferrous complex all cruised higher. Iron ore gained 1.02%, rebar rose 3.34%, and HRC increased 3.78%.

Copper: The most traded SHFE 2108 copper contract closed 0.86% lower at 69,110 yuan/mt today, with open interest down 8,620 lots to 115,500 lots.

The expansion rate of US service industry in June was lower than expected and hit a new low in the year. Goldman Sachs expected very little possibility for the overheated economy. US Fed announced that it would not reduce the debt purchase before December. US treasury yields fell sharply last night, and US dollar index rose to 92.54, forcing down the prices of bulk commodities. International oil prices all declined.

Domestic market was slightly affected by the Opinions on Strictly Cracking Down on Illegal Securities Activities based on Law jointly issued by General Office of the CPC Central Committee and General Office of the State Council. The focus tonight will be China's foreign exchange reserves, and whether SHFE copper will have a directional guidance.

Aluminium: The most traded SHFE 2108 aluminium contract fell 1.2% to close at 18,930 yuan/mt today, with open interest down 25,475 lots to 211,065 lots.

Lead: The most active SHFE 2108 lead contract gained 0.57% to close at 15,895 yuan/mt today, with open interest down 593 lots to 62,765 lots.

Bears reduced positions, and SHFE remained bullish technically, reserving yesterday’s loss. Spot trade recovered today, as smelters actively shipped goods, and traders kept enthusiastic in deliveries. Domestic social inventories of lead ingots is expected to keep rising. The consumption remained weaker in the transitional period of the off-peak and peak season, and downstream users purchased on rigid demand. Overseas lead ingot stocks kept falling, and overseas prices remained higher than that in China. Whether LME lead will continue to rise and drive SHFE lead up to stabilise at 15,900 yuan/mt will worth attention tonight.

Zinc: The most active SHFE 2108 zinc contract gained 0.68% to close at 22,350 yuan/mt today, with open interest up 1,454 lots to 99,877 lots.

Nickel: The most traded SHFE 2108 nickel contract finished the day 1.29% lower at 135,480 yuan/mt today, with open interest down 13,805 lots to 121,668 lots.

Tin: the most liquid SHFE 2108 tin contract dropped 0.67% to end at 216,340 yuan/mt today, with open interest down 5,774 lots.

The intensive leaving of funds showed the bulls’ lack of confidence in the continuous price rise in the short term. The prices fell from 220,000 yuan/mt under pressure, but the long-term trend showed no obvious change. Therefore, SHFE tin is still expected to fluctuate higher with the fundamental support and under the pressure of leaving funds.