SMM Evening Comments (May 24)

SHANGHAI, May 24 (SMM) – Nonferrous metals saw mixed trading on Thursday May 24. SHFE lead surged 1.5%, tin rose over 1% and aluminium gained 0.8%. SHFE copper dropped 0.9%, zinc lost 0.7% and nickel dipped.

The ferrous complex, except for coking coal, rose across the board. Hot-rolled coil led the increases with a gain of 1.5%. Rebar and iron ore rose over 1% and coke nudged up.

Copper: The SHFE 1807 contract traded rangebound along the daily moving average for most of today, with open interest sharply down 9,918 lots. Technically, the contract struggled among several moving averages with support from the 10- and 20-day moving averages and resistance at the five-day moving average. We expect it to test the resistance at the 51,450 yuan/mt level tonight.

Aluminium: As longs were keen to enter the market at low levels, the SHFE 1807 contract rose to the 14,750 yuan/mt level and traded rangebound in the morning. The contract came off from a high of 14,795 yuan/mt in the afternoon as most longs took profits and left. The trading level of SHFE aluminium is likely to rise as social inventories have declined for two consecutive weeks.

Zinc: With support from the daily moving average, the SHFE 1807 contract traded rangebound at the 23,435 yuan/mt level with a range of 50 yuan/mt as shorts and longs battled it out. SHFE zinc fell for three consecutive days and we expect it to test the pressure at the 23,500 yuan/mt level tonight.

Nickel: Despite pressure from a strong US dollar, the SHFE 1807 contract traded steadily in a narrow range as robust domestic downstream consumption depleted inventories. The contract is expected to weaken tonight as its KDJ indicators expanded downwards and the MACD long term moving average shortened. Investors will take more cues from the Federal Open Market Committee (FOMC)'s meeting on May 2, weekly US unemployment claims, and existing home sales in April.

Lead: Longs bolstered the SHFE 1807 contract to a high of 20,100 yuan/mt in the morning. As major shorts entered the market at high levels, the contract fell to 19,960 yuan/mt in the afternoon and hovered in a range of 80 yuan/mt. As investors continued to go long, we see SHFE lead sustaining its upward momentum tonight. As investors carried over their positions from the 1806 to the 1807 contract, price spreads between the two narrowed to 455 yuan/mt today. We expect the spread to continue to narrow.

Tin: The SHFE 1809 contract expanded its gains today. The contract rapidly surged in the afternoon and hit a high of 148,240 yuan/mt. We expect it to continue its strong performance tonight with resistance at the 148,500 yuan/mt and 150,000 yuan/mt levels.

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