SMM Evening Comments (Jun 21)

SHANGHAI, Jun 21 (SMM) – SHFE nickel outperformed its nonferrous counterparts on Thursday June 21 with a gain of 1.7%. Tin inched up 0.19% and aluminium nudged up 0.04%. Copper dipped 0.12%, zinc and lead lost 0.60% and 0.68%, respectively.

The ferrous complex saw mixed trading. Coke jumped 1.3%, iron ore edged up 0.22% while hot-rolled coil dipped 0.18% and rebar lost 0.4%. Coking coal dropped 1.7%. 

Copper: As shorts cut their positions and as longs added their positions, the SHFE 1808 contract surged to a high of 51,980 yuan/mt. With pressure at the 40-day moving average, the contract failed to extend its gains and consolidated at high levels. As speculative longs took profit and left, the contract fell to the 51,720 yuan/mt level and found some support. It then hovered around the 51,800 yuan/mt level till closing. Market jitters slightly eased from the previous day. The SHFE 1808 contract is likely to trade rangebound in the short term if trade disputes between the US and China do not exacerbate.

Aluminium: The SHFE 1808 contract hovered at 14,225 yuan/mt after it reached a high of 14,270 yuan/mt as longs increased. It closed at 14,185 yuan/mt, up from Wednesday. However, we see downward room for the contract in the low season downstream and declining costs at producers. It is likely to test support at 14,000 yuan/mt in the short term. 

Zinc: With pressure from shorts, the SHFE 1808 contract tested support at the Bollinger lower bands today. It fell below the daily moving average and traded rangebound at 23,360 yuan/mt after it hit a high of 23,575 yuan/mt. With an oversupplied domestic spot market and as LME zinc fell to a low from last July, the contract is expected to open at lows tonight and test support at 23,000 yuan/mt. 

Nickel: The SHFE 1809 contract climbed all the way up to a high of 116,220 yuan/mt after opening as investors added their longs amid improved sentiment. Sentiment improved as investories shrank and demand from downstream stainless steel plants grew. The contract hovered at 115,220 yuan/mt in the afternoon as the US dollar gained. With a capital inflow of 184 million yuan during the day, the contract is expected to consolidate at highs tonight. Investors would take more cues tonight from the US initial jobless claims over the week ended June 16. 

Lead: The SHFE 1807 contract plunged to a low of 19,850 yuan/mt after it surged to a high of 20,050 yuan/mt as investors’ sentiment cooled. It closed at 19,855 yuan/mt with open interests down 2,626 lots to 53,126 lots. We see it testing support at 19,800 yuan/mt in the short run. Investors would take guidance from the US dollar tonight. 

Tin: A stronger LME tin buoyed the SHFE 1809 contract to a high of 147,300 yuan/mt initially before it fell. It met pressure at the five-day moving average and closed at 145,740 yuan/mt, down 280 yuan/mt from Wednesday. It is likely to remain trading rangebound in the short term with resistance.