SHANGHAI, Jul 11 (SMM) – SHFE base metals tumbled across the board on Wednesday July 11 after the US announced a list of $200 billion of Chinese goods that will be subject to tariffs of 10%.
Zinc plunged 5.67%, its largest daily decline in over a year and a half. Copper slumped over 3%, lead dropped 2.63%, nickel shed over 2%, aluminium fell over 1% and tin dipped close to 1%.
The ferrous complex closed mixed. Rebar, hot-rolled coil and iron ore inched up while coking coal and coke fell.
Copper: As shorts flooded the market, the SHFE 1809 contract fell to a year-low of 47,520 yuan/mt and lost over 4% at one point before it rebounded before closing. The contract is unlikely to stem its decline and is likely to fall to the 47,500 yuan/mt level if the US dollar index climbs up. We expect it to test the 48,000 yuan/mt level tonight. Investors can take some cues from the US consumer price index (CPI) and producer price index (PPI) in June.
Aluminium: As shorts significantly added their positions, the SHFE 1809 contract slumped to a low of 13,865 yuan/mt before it recovered some losses. Aluminium was less vulnerable than other nonferrous metals as supplies of bauxite were tight and as alumina prices rebounded on production cuts. Longs entered the market at low prices. The nonferrous complex is likely to recover some losses tonight if there are no significant economic and political developments.
Zinc: The SHFE 1809 contract dropped by 6% twice during the day. Shorts were unwilling to take profits and leave the market. Support is seen at the 20,000 yuan/mt level. We will monitor China’s countermeasures to the fresh round of US tariffs.
Nickel: Trade tension between the US and China caused the SHFE 1809 contract to open at lows of 110,510 yuan/mt. Shorts dragged it to a low of 108,140 yuan/mt, with support at the 108,000 yuan/mt level. The contract closed at 109,370 yuan/mt, down 2,280 yuan/mt from the previous day. As the KDJ indicator expanded downwards and the MACD green line lengthened, it is likely to hover at 109,000 yuan/mt level tonight. Investors would take more guidance tonight from the US weekly crude oil inventories, its PPI in June and wholesale inventories data in May.
Lead: The SHFE 1808 contract broke support at all moving averages, to a low of 18,790 yuan/mt as base metals weakened across the board. It lost over 2.6% to close at 19,045 yuan/mt. Open interests continued to decline 2,832 lots to 56,464 lots during the day. We see further downward room in the contract tonight.
Tin: The SHFE 1809 contract regained some losses and consolidated around the 142,300 yuan/mt during the day after it initially plummeted to a low of 141,230 yuan/mt. We expect the contract to remain weak in the short term as concerns of a trade war continue to weigh on market sentiment. Support is seen at the 140,000 yuan/mt level.