SMM Evening Comments (Aug 10)

SHANGHAI, Aug 10 (SMM) – Both the nonferrous and ferrous complex dipped across the board as the US dollar strengthened. SHFE zinc tumbled over 1.3%, lead, tin, and nickel fell nearly 1%, aluminium dropped 0.91%, and copper edged down. 

Coking coal plunged nearly 3%, coke slid 0.76%, iron ore dipped 0.69%, hot-rolled coil lost 0.64%, and rebar closed 0.38% lower.  

Copper: The SHFE 1810 contract slumped at noon as longs exited and as the US dollar jumped above 96. It lost 110 yuan/mt from Thursday to close at 49,600 yuan/mt. Offshore yuan continued to depreciate and stood at 6.86 per US dollar. Copper prices may receive some support as SHFE inventories lost over 20,000 mt to a six-month low of 171,000 mt this week. The contract is seen hovering at 49,500 yuan/mt tonight. Investors would take more guidance tonight from the US consumer price index for July. 

Aluminium: The SHFE 1810 aluminium contract fell in the afternoon after a jump in the US dollar index. Support was seen at the 14,600 yuan/mt level and the contract closed at 14,620 yuan/mt. While it lost almost all the gains yesterday, trading levesl mostly stayed above the five- and 10-day moving averages. We believe support is rather firm for aluminium, compared with other base metals, and expect the contract to trade rangbound at 14,650 yuan/mt tonight.

Nickel: The SHFE 1811 nickel contract rose in the morning as longs added their wager before it fell to a low of 113,020 yuan/mt as the US dollar strengthened. A capital outflow of 207 million yuan was recorded today for all SHFE nickel contracts, and topped base metals. We expect the contract to trade around 113,600 yuan/mt tonight, when investors look out for the US CPI data in July.

Zinc: Rising shorts dragged the SHFE 1810 down sharply at noon as the US dollar gained. The contract dipped slower in the afternoon, touched a low of 21,240 yuan/mt and closed at 21,285 yuan/mt. Support lingered at the 20-day moving average. The movement of yuan against US dollar will be one of the key things to watch tonight. 

Lead: As the dollar hit a 13-month peak, the SHFE 1809 contract plummeted past the five-day moving average to an intraday low of 18,205 yuan/mt and closed at 18,235 yuan/mt today after its initial increase. If the dollar continues to strengthen, the contract is likely to extend its decline and to test support at the five-day moving average tonight.

Tin: The SHFE 1809 contract opened high but declined during the day, to a low of 145,100 yuan/mt. It closed at 145,250 yuan/mt with open interests up 854 lots to 19,640 lots. Without upward momentum, the contract is likely to see further downward room in the near term. Support will be at the 145,000 yuan/mt level.