SMM Evening Comments (Jul 23)

SHANGHAI, Jul 23 (SMM) – Most SHFE nonferrous metals rose on Monday July 23. Zinc jumped 1.7%, copper and aluminium increased some 1.4%, nickel went up over 1% while lead and tin edged down.

The ferrous complex went up across the board. Coke surged over 3%, iron ore jumped over 1%, hot-rolled coil and rebar rose close to 1% and coking coal inched up.

Copper: The SHFE 1809 contract rebounded above the five-day moving average during the day after it initially lost most of gains it made last Friday night. Market sentiment improved after the Chinese government released draft rules and guidelines to strength regulations on financial institutions’ asset management businesses on Friday and the central bank injected 502 billion yuan into the market via medium-term lending facility (MLF) today. Shorts and longs struggled around the 49,000 yuan/mt level. Market participants would take cues from the US existing home sales data in June.

Aluminium: With support at the five- and 10-day moving averages, the SHFE 1809 contract hovered around 14,230 yuan/mt during the day after jumping to a high of 14,290 yuan/mt. Open interests for the 1810 and 1811 contracts increased, suggesting investor confidence in the forward market. We expect the 1809 contract to edge down with limited support from the fundamentals. In addition to home sales data, investors would also look out for change in the US dollar index.

Zinc: The SHFE 1809 contract rose during the day with a bullish MACD crossover emerging. The shrinking inventory across Shanghai, Guangdong and Tianjin also gave support to zinc prices. We expect prices to rise tonight with resistance at the 20-day moving average.

Nickel: As downstream demand from stainless steel stayed firm amid relatively low inventory, the SHFE 1809 contract received support at 108,800 yuan/mt and rebounded to a high of 110,460 yuan/mt. However, pressure is seen at the 10-day moving average. China’s new rules on asset management improved market sentiment on the cash front. The contract saw an outflow of 140 million yuan during the day, topping base metals contracts. As the KDJ indicators expanded upwards and the MACD green line shortened, the contract is expected to hover at highs around 110,000 yuan/mt tonight.

Lead: The SHFE 1809 contract climbed to above its daily moving average and hovered around 18,470 yuan/mt during the day after it traded within a narrow range around the daily moving average. The contract also broke the five-day moving average after consolidating for six days. We expect the contract to consolidate around the 10-day moving average tonight.

Tin: The SHFE 1809 contract fell during the day after it registered increases last week, suggesting strong resistance. We expect it to trade rangebound in the short term with resistance at the 147,000 yuan/mt level.