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SMM Evening Comments (Aug 2)
Aug 2,2018 17:51CST
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SMM Evening Comments

SHANGHAI, Aug 2 (SMM) – Nonferrous metals dipped across the board on Thursday August 2 with SHFE nickel leading the losses and closing over 2.5% lower. Aluminium lost 1.3%, copper fell 1.2%, and lead declined 1%. Zinc and tin inched down. 

The ferrous complex saw mixed trading as coke led the gains and rose over 2%. Rebar and hot-rolled coil dipped over 1%, while iron ore fell slightly, and coking coal went flat. 

Copper: The SHFE 1809 contract tumbled to a low of 48,740 yuan/mt in the afternoon as shorts soared on a stronger US dollar index. The US dollar gained on expectations of further interest rate hikes by the Federal Reserve and higher-than-expected US employment data. Prices of copper may face further pressure if the US decides to raise tariffs to 25% on $200 billion of Chinese goods. After workers at BHP Billiton’s Escondida mine rejected the company’s wage offer on Thursday, a 30-day strike could occur if government intervention fails. The 1809 contract is expected to test support at the daily moving average tonight. Investors would take more guidance tonight from the US initial jobless claims last week, factory orders and durable goods orders in June.

Aluminium: Rising shorts dragged the SHFE 1809 contract to the lowest level in two weeks, at 14,245 yuan/mt. Cost and the daily moving average provided support and the contract rebounded to around 14,330 yuan/mt, and closed at 14,320 yuan/mt. Open interests decreased 14,806 lots to 242,150 lots during the day. Market participants should monitor the development of trade tariffs between China and the US tonight. 

Zinc: The SHFE 1809 contract slumped below the 20-day moving average in the afternoon as investors added their shorts and cut longs. It received support at the 21,000 yuan/mt level after it fell to a low of 21,080 yuan/mt. Rising longs then buoyed it but it failed to break pressure at the Bollinger middle band, and closed at 21,455 yuan/mt, some 30 yuan/mt lower from Wednesday. We forecast it to test resistance at the Bollinger middle band tonight. 

Nickel: The SHFE 1809 contract weakened in the morning and extended its losses in the afternoon. It then reversed some losses as the low levels in close to two years of LME and SHFE inventories provided limited support to shorts. But it met pressure at its daily moving average and edged down, closing at 110,540 yuan/mt. A total of 413 million yuan flowed out of the nickel complex today, topping the nonferrous metals. Technically, its KDJ converged and expanded downwards while the MACD red line shortened. We expect the contract to trade rangebound around 110,500 yuan/mt tonight. Market participants tonight can take some cues from US initial jobless claims last week, factory orders and durable goods orders in June.

Lead: Amid bearish sentiment, the SHFE 1809 contract tumbled to 18,190 yuan/mt after it hovered around 18,335 yuan/mt. It then consolidated and closed at 18,240 yuan/mt. The contract has kept some distance with its all moving averages above and its five- and 10-day moving averages shaped a death cross. We expect the contract to remain rangebound and continue its weak performance tonight.

Tin: As longs exit, the SHFE 1809 contract fell after it climbed to a high of 147,760 yuan/mt. It lost 290 yuan/mt from Wednesday to close at 147,150 yuan/mt, with open interests down 942 lots to 22,636 lots. We see it trading with pressure tonight with support at 145,000 yuan/mt. 



Evening comments
Futures movement

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