SMM Evening Comments (Feb 6)

SHANGHAI, Feb 6 (SMM) – SHFE aluminium led the loss in base metals today with an over 1% drop, while nickel was down 0.75% and lead was 0.66% lower. Copper slid 0.51%.

The ferrous complex showed much stronger performance today as coke and coking coal rose 2%. Iron ore also edged up slightly but hot-rolled coil and rebar dipped.

Copper: SHFE copper was weaker due to an overall bearish sentiment in the financial market as global stocks slumped. It would key to watch if the contract moves above the 53,000 yuan/mt level again tonight.

Aluminium: Several waves of drops hit SHFE aluminium today as the contract registered a new recent low at 14,215 yuan/mt. The downward movement is in line with our expectation and we see more room in the same direction due to increasing inventory and lower costs.

Nickel: The SHFE 1805 nickel contract was under pressure today with a fund outflow of 102 million yuan. Trading volumes were down 72,000 lots to 1.52 million lots while open interest was reduced by 8,040 lots to 484,000 lots. Support is seen at the 20-day moving average tonight.

Zinc: Two levels of support at the five-day and 10-day moving averages were broken today for SHFE zinc as shorts dominated the market. However, investors are not expected to keep their positions for long due to the approaching Chinese New Year holiday. We see support at the 20-day moving average now.

Tin: While SHFE tin outperformed other base metals today with a 0.72% rise, we see pressure at the 152,000 yuan/mt level. Rangebound trading is expected in the near term while support is seen at 147,000 yuan/mt.  

Lead: SHFE lead is set to test support at the 20-day moving average tonight with weaker LME lead movement. Pressure is seen at the five- and 10-day moving averages. 

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