SMM Evening Comments (Mar 5)

SHANGHAI, Mar 5 (SMM) – Nonferrous metals futures on the SHFE dropped for the most part today except for tin, which inched up slightly. Zinc fell over 2%, aluminium slid over 1%, while copper and lead edged down.

Ferrous metals fell across the board with iron ore leading the slump and closing 4% lower. Coke dropped over 2%, rebar and hot-rolled coil slipped over 1%, and coking coal fell slightly.

Copper: As investors added their short positions, the SHFE copper contract remained weak during the day but support is seen at the 52,000 yuan/mt level. We see limited downward room tonight, when investors would look out for the US Markit services purchasing managers' index (PMI) in February.

Aluminium: SHFE aluminium dropped today as China’s inventory refreshed another record high to stand at 2.19 million mt, according to SMM data. However, we expect the contract to be rangebound in the short term as downstream demand remains to be seen with the approach of high season.

Nickel: SHFE nickel fell following a stronger US dollar and the drops seen in ferrous metals, closing at 1.2% lower at 101,440 yuan/mt. While investors watch out for the 40-day moving average support, the US ISM non-manufacturing PMI in February may also provide some cues tonight.

Zinc: With pressure from short bets and slower-than-expected consumption recovery, SHFE zinc slumped below the 60-day moving average and fell to a low of 25,625 yuan/mt today. It looks difficult for prices to come back up much tonight.

Lead: SHFE lead closed at a two-month low at 18,750 yuan/mt today against the backdrop of stronger US dollar and more short bets entering the market. We expect the contract to continue to weaken tonight while LME lead sees pressure at $2,450/mt.

Tin: SHFE tin outperformed its peers today and gained a 0.41% rise. However, we expect it to be rangebound under pressure due to the weak performance of nonferrous metals. We see support at the 146,000 yuan/mt level and resistance at 148,500 yuan/mt.

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