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SMM Evening Comments (Aug 9)

Price Review & Forecast 06:06PM Aug 09, 2018 Source:SMM

SHANGHAI, Aug 9 (SMM) – Nonferrous metals rose across the board as SHFE aluminium led the gains and closed 2.4% higher. Lead inched up 0.85%, copper rose 0.75%, nickel increased 0.67%, zinc grew 0.49%, and tin went up slightly.

The ferrous complex saw mixed trading. Coke surged 1.7%, coking coal and iron ore gained 0.59% and 0.49%, respectively, while rebar and hot-rolled coil edged down.

Copper: The SHFE 1810 contract climbed above the 20-day moving average to a high of 50,080 yuan/mt with rising base metals. Higher-than-expected Chinese consumer price index (CPI) and producer price index (PPI) for July contributed to the bullish sentiment. However, the contract failed to stand above the five-day moving average, and closed at 49,950 yuan/mt. We expect it to test the 50,000 yuan/mt level tonight. Investors would take more guidance tonight from the US PPI in July, and its initial jobless claims last week. 

Aluminium: The SHFE 1810 contract jumped above the 60-day moving average to a two-month high of 14,885 yuan/mt. This was buoyed by industrial action at Alcoa’s Pinjarra alumina refinery in Western Australia as well as higher costs. Some 455 million yuan of capital flew into SHFE aluminium contracts, topping the base metals. As the 1810 contract broke its rangebound trend around 14,500 yuan/mt since mid-June, it is expected to hover at the 14,850 yuan/mt level tonight.

Zinc: Buoyed by increase long bets, the SHFE 1810 contract traded robustly between the five- and 40-day moving averages during the day with the highest level at 21,660 yuan/mt. It gained 70 yuan/mt from Wednesday and closed at 21,595 yuan/mt, with open interests up 10,036 lots to 175,000 lots. We forecast it to test pressure at the 40-day moving average tonight. 

Nickel: Stronger-than-expected Chinese CPI and PPI data for last month saw the SHFE 1811 contract rally twice to around 115,000 yuan/mt. With support at 113,800 yuan/mt, it gained 760 yuan/mt from Wednesday to close at 114,450 yuan/mt. Open interests were little changed at 281,000 lots. As the KDJ indicators expanded upwards and the longer-term moving average of the MACD lengthened, the contract is likely to trade robustly around 114,500 yuan/mt tonight. 

Lead: The SHFE 1809 contract hovered around the daily moving average and picked up a bit in the afternoon amid strengthened base metals contracts. Open interests lost 1,040 lots to 59,428 lots during the day. It is likely to test pressure at the 18,523 yuan/mt level, with support at the 10-day moving average tonight. 

Tin: The SHFE 1809 contract recovered some losses overnight and stood back above the 147,000 yuan/mt level. As both longs and shorts exited, open interests were down 422 lots to 18,786 lots. We expect it to trade rangebound with support at 145,000 yuan/mt tonight.