SMM Evening Comments (May 18)

SHANGHAI, May 18 (SMM) – The nonferrous complex closed higher except for SHFE tin, aluminium and zinc. Nickel led the gains with a rise of 2.2%, lead grew over 1%, and copper inched up.

Ferrous metals dropped across the board with coking coal leading the losses and closing 2.2% lower. Rebar fell over 1%, while coke, hot-rolled coil, and iron ore lost close to 1%.

Aluminium: The SHFE 1807 contract initially tumbled to a low of 14,770 yuan/mt in the morning as longs took profits and closed out their positions. The contract then remained rangebound within a narrow range for the rest of the day. We expect it to continue its strong and rangebound pattern give relatively balanced fundamentals and a lack of macroeconomic developments.

Copper: With support from short reducing their positions, the SHFE 1807 contract continued its rangebound pattern today. Technically, it now struggles between the five- and 10-day moving averages, and above the 40-day moving average with the KDJ indicator expanding upwards. We expect it to remain rangebound tonight.

Zinc: As fundamentals diverged, the SHFE 1807 contract traded rangebound during the day. Smelters cut production due to maintenance works. The inflow of imported zinc grew uncertainty around inventories and investors took a watch-and-wait stance. We expect SHFE zinc to test resistance at the 20-day moving average tonight.

Nickel: As longs added their positions, the SHFE 1807 contract surged to a high of 110,000 yuan/mt in the morning. The contract then hit a two-year high of 110,430 yuan/mt in the afternoon as inventories declined. We expect it to trade strongly and rangebound tonight. The second round of US-China trade talks tonight will provide more market direction.

Lead: The SHFE 1806 contract broke the volatile trading level today after days of consolidation. Given the 1,700 mt increase in LME lead inventories, LME lead is likely to weaken tonight. SHFE lead is expected to be dragged down by its LME counterpart.

Tin: The SHFE 1809 contract tumbled to a low of 144,500 yuan/mt in the morning as shorts significantly cut their positions. It then pared some losses and rebounded to around the 145,000 yuan/mt level in the afternoon. We expect it to test the support at the 145,000 yuan/mt level in the short term. If that level is broken, SHFE tin is likely to continue to fall to the 143,000 yuan/mt level.

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