SHANGHAI, Jul 4 (SMM) – Nonferrous metals fell across the board on Wednesday June 4 and sharply extended their losses in the afternoon. SHFE zinc led the decreases with a loss of over 3%. SHFE nickel and copper slumped over 2%, lead dropped over 1% and tin and aluminium dipped.
The ferrous complex recovered some previous losses. Rebar, hot-rolled coil and coke increased close to 1% while coking coal slid close to 1% and iron ore dipped.
Copper: As shorts and longs diverged, the SHFE 1808 contract hovered around its opening level within a narrow range in the morning. Shorts later suppressed the SHFE 1808 contract down to the 50,000 yuan/mt level in the afternoon. Bearish sentiment lingered during the day as trade conflicts remained in the spotlight ahead of a looming tariff deadline. SMM will monitor the strength at the 50,000 yuan/mt level tonight.
Aluminium: The SHFE 1808 contract climbed to a high of 14,110 yuan/mt on market talk that an aluminium producer would soon cut production. Later, other SHFE metals tumbled. The market then expected that the potential production cut would be insufficient to buoy aluminium prices to return to profitable levels. The contract then lost its early gains and closed at 13,955 yuan/mt. Its open interest shrank 21,688 lots to 634,168 lots, a new low since July 2017. With limited interest from investors, the contract is likely to remain rangebound tonight.
Zinc: As shorts flooded the market, the SHFE 1808 contract broke support at 22,500 yuan/mt and plummeted to a low of 22,310 yuan/mt after it hovered around the 22,710 yuan/mt level during the day. We expect the contract to test the 22,000 yuan/mt level tonight given bearish sentiment.
Nickel: The SHFE 1809 contract slid to a low of 112,530 yuan/mt after it hovered around 113,620 yuan/mt. The 40-day moving average and low inventories in China provided some support to prices. The KDJ lines of the 1809 contract diverged and expanded downwards while the MACD green line lengthened. We expect the contract to test the 112,000 yuan/mt level tonight.
Lead: As base metals weakened, the SHFE 1808 contract traded between the Bollinger middle and lower bands. It slumped near closing and fell to a low of 19,880 yuan/mt on outflows of capital. Open interests fell 4,396 lots to 67,514 lots during the day. The contract will test pressure at the Bollinger middle bands, at 19,945 yuan/mt, tonight.
Tin: The SHFE 1809 contract fell during the day as simmering trade disputes between the US and China affected the market’s risk appetite. We expect the contract to continue its weak and rangebound pattern in the short term with support at the 143,000 yuan/mt level.
