SMM Evening Comments (Aug 14)

SHANGHAI, Aug 14 (SMM) – Nonferrous metals dipped for the most part as SHFE zinc led the losses and closed 2% lower. Nickel fell over 1.4%, tin and copper dipped, while aluminium inched up, and lead closed 0.52% higher. 

The ferrous complex saw mixed trading. Coke jumped over 2%, rebar rose over 1%, while iron ore and hot-rolled coil closed nearly 0.1% lower, and coking coal fell 0.42%.

Copper: Copper prices are unlikely to receive support from weak fundamentals in the short term. The SHFE 1810 contract tumbled twice to a low of 49,370 yuan/mt. The contract lost all the gains from Monday and closed at 49,520 yuan/mt. While the US dollar index hovered at highs around 96.3, offshore yuan continued to depreciate and fell to 6.9 per US dollar. Slower growth seen from China's economic data weighed on market sentiment. As support at the 20-day moving average weakened, the contract is expected to trade weakly around 49,500 yuan/mt tonight. Investors would take more guidance tonight from the eurozone’s gross domestic product (GDP) data for the second quarter. 

Aluminium: As shorts and longs competed during the day, the SHFE 1810 contract rebounded after it fell to a low of 14,670 yuan/mt. It closed above the 10- and 20-day moving averages, at 14,700 yuan/mt, up 10 yuan/mt from Monday. Open interests increased 2,310 lots to 284,204 lots. Without strong momentum, the contract is expected to continue its rangebound trend and remain above all moving averages tonight. 

Zinc: As investors added their shorts and covered longs, the SHFE 1810 contract declined to a low of 20,790 yuan/mt near closing. It lost 420 yuan/mt from Monday to close at 20,820 yuan/mt, with open interests up 29,760 lots to 220,000 lots. An increase of 10,500 mt of zinc inventory in LME warehouses during the European trading session is expected to further weigh on zinc prices tonight. 

Nickel: The SHFE 1811 contract traded in a narrow range around 112,000 yuan/mt with pressure above from the 60-day moving average. It slumped 1,630 yuan/mt from August 13 and closed at 111,980 yuan/mt. SHFE contracts lost 189 million yuan of capital during the day. We expect the 1811 contract to continue its rangebound trend around 112,000 yuan/mt tonight. 

Lead: The SHFE 1809 contract stemmed its overnight decline and rose during the day to settle at 18,365 yuan/mt. The 10-day moving average continued to provide support. We expect the contract to test pressure at 18,420 yuan/mt tonight. 

Tin: The SHFE 1809 contract extended its overnight losses to a low of 143,690 yuan/mt before it reversed most of its early losses and closed at 145,080 yuan/mt. We expect the contract to remain rangebound in the short term with support at 145,000 yuan/mt and resistance at 147,000 yuan/mt.