SMM Evening Comments (Jun 22)

SHANGHAI, Jun 22 (SMM) – Nonferrous metals futures saw mixed trading today as SHFE nickel led the gains with a rise of nearly 1.9%. Copper and aluminium inched up, while zinc slumped nearly 1.3%. Other base metals edged down.   

The ferrous complex, except for iron ore, dipped across the board. Coking coal lost almost 2%, coke dropped over 1.4%, rebar closed nearly 1.3% lower, and hot-rolled coil inched down. 

Copper: As pressure from shorts eased, the SHFE 1808 contract recovered losses from last night and closed at 51,870 yuan/mt, up 140 yuan/mt from Thursday. The contract mostly traded around the 60-day moving average during the day. Tonight, investors would take more cues from the preliminary June reading of the Markit manufacturing purchasing managers’ index (PMI) for eurozone and the US.

Aluminium: As shorts decreased, the SHFE 1808 contract halted its downward trend but lacked upward momentum today. It rebounded after it fell to a low of 14,145 yuan/mt before noon, and closed at 14,210 yuan/mt, up from the previous day. We expect pressure from fundamentals to remain in the medium term as prices of alumina and prebaked anode decline. The contract is likely to trade weakly next week at 14,050-14,350 yuan/mt. 

Zinc: The SHFE 1808 contract weakened further during the day amid pessimistic sentiment. It lost 230 yuan/mt from the previous day to close at 23,085 yuan/mt. This followed after it dropped to 22,580 yuan/mt, a record low within this year. As the bearish outlook improved near closing, the contract is expected to inch up from lows and try to stand firm at 23,000 yuan/mt tonight. 

Nickel: Buoyed by longs, the SHFE 1809 contract climbed during the day and broke pressure at 117,000 yuan/mt in the afternoon. It gained 2,140 yuan/mt at closing with open interests rising 37,000 lots to 392,000 lots. With inflow capital of 396 million yuan, the contract is expected to strengthen further tonight.

Lead: The SHFE 1807 contract traded weakly during the day. It dipped to a low of 19,610 yuan/mt after opening and inched up to hover at 19,815 yuan/mt. The contract closed at 19,935 yuan/mt, down 20 yuan/mt from Thursday, with open interests declining 3,324 lots to 49,802 lots. The dominant contract is likely to be transferred to the 1808 contract at the beginning of next week. We expect the 1807 contract to remain its rangebound trend tonight. 

Tin: The SHFE 1809 contract inched up from the previous trading day to close at 146,100 yuan/mt but continued to face pressure today. It is likely to consolidate at current levels in the short run with support at 143,000 yuan/mt and resistance at 148,000 yuan/mt.