SMM Evening Comments (Jul 17)

SHANGHAI, Jul 17 (SMM) – SHFE nonferrous metals conitnued their weak performance on Tuesday July 17 after weaker than expected Chinese economic data was released yesterday.

Zinc, lead and nickel dropped over 2%, tin and copper edged down while aluminium inched up.

The ferrous complex rose across the board except for rebar. Gains were slim with coking coal up over 1%, hot-rolled coil, coke and iron ore edging up.

Copper: The SHFE 1809 contract came off and stablised at 48,500 yuan/mt during the day after it briefly broke the 49,000 yuan/mt level. Concerns over the US-China trade disputes and weak Chinese economic data weighed on market sentiment and copper prices. We expect the contract to continue to test the 49,000 yuan/mt level tonight. Market participants can take some cues from the US industrial production data for June.

Aluminium: The SHFE 1809 contract hovered around the five- and 10-day moving averages during the day. Open interest of all SHFE aluminium contracts shrank 59,000 lots to 599,000 lots, a new low in a year, with trading volumes sharply down 80,000 lots. We expect the contract to remain rangebound in the short term as costs rebound but demand weakens.

Zinc: Under the pressure from its daily moving average, the SHFE 1809 contract consolidated around 20,200 yuan/mt during the day after its initial increase. Zinc prices are likely to gain some support from shrinking social inventories across Shanghai, Guangdong and Tianjin. We expect the contract to strengthen tonight given LME zinc’s strong performance in the European trading hours.

Nickel: As shorts added their positions and longs cut their positions, the SHFE 1809 contract fell to a low of 108,560 yuan/mt after it hovered around the 109,700 yuan/mt level. It then finished the session by hovering around the 108,800 yuan/mt. Its KDJ lines diverged and expanded downwards while the MACD green line lengthened. We expect the contract to trade rangebound around the 109,000 yuan/mt level tonight. US industrial production in June may give some cues to the market.

Lead: The SHFE 1808 contract traded below its daily moving average today and lost the gains from the last two trading days. Funds continued to flow out of the market. We see strong resistance from above in the short term and expect the contract to remain weak tonight.

Tin: The SHFE 1809 contract hovered around 143,900 yuan/mt within a narrow range during the day. With US-China trade developments continuing to take centrestage, we expect the contract to be weak in the short term with support at the 142,500 yuan/mt level.