SMM Evening Comments (Aug 22)

SHANGHAI, Aug 22 (SMM) – Nonferrous metals futures saw mixed trades as most extended their increases but at slower rates. SHFE tin jumped 0.97%, zinc grew 0.67%, lead rose 0.4%, and aluminium inched up 0.1%. Copper fell 0.35% and nickel lost nearly 1.2%.

The ferrous complex mostly weakened. Iron ore slumped 2.4%, hot-rolled coil slid 1.2%, rebar dipped 0.82%, while coke nudged up 0.19%, and coking coal rose 1.9%. 

Copper: Surging shorts dragged the SHFE 1810 contract to the lowest level this week, at 48,130 yuan/mt in the afternoon. With support at the five-day moving average, the contract lost 170 yuan/mt from Tuesday and closed at 48,290 yuan/mt. Open interests declined 6,892 lots to 181,000 lots. It is likely to hover above the 48,000 yuan/mt level as pessimistic sentiment continue to linger. Tonight, investors would take more guidance from the US existing home sales in July, weekly crude oil inventory data from the Energy Information Administration (EIA), August meeting minutes of the Federal Reserve and US-China trade talks.

Aluminium: With support from the five-day moving average, the SHFE 1810 contract regained some losses after it fell to 14,610 yuan/mt at one point. It closed at 14,655 yuan/mt. Open interests lost 5,584 lots to stand at 278,000 lots.Tonight, the market will take cues from developments of US-Sino trade negotiations and US sanctions on Russian aluminium. We see SHFE aluminium continue to test support at the 10-day moving average tonight.

Zinc: With some support from the five-day moving average, the SHFE 1810 contract rebounded from an intraday low of 20,170 yuan/mt. It closed 225 yuan/mt lower from Tuesday, at 20,335 yuan/mt, with open interests up 6,606 lots to 223,000 lots. As the MACD green line shortened, the contract may again test resistance at the 10-day moving average tonight. 

Nickel: The SHFE 1811 contract lacked upward momentum after it broke resistance at the 60-day moving average. As LME nickel weakened in the afternoon, the contract slid and closed at 110,940 yuan/mt. As KDJ indicators expanded downwards and the MACD green line lengthened, the contract is expected to hover around 111,300 yuan/mt tonight.  

Lead: As some shorts left near closing, the SHFE 1810 contract stood above the five-day moving average. It closed 70 yuan/mt higher from Tuesday, at 17,535 yuan/mt. However, there is little upward room in the short run as shorts continue to exert pressure. We expect the contract to consolidate around 17,600 yuan/mt tonight. 

Tin: The SHFE 1901 contract extended its overnight increase in the morning but lacked upward momentum in the afternoon as sentiment over US-Sino trade talks worsened. The contract rose 450 yuan/mt from Tuesday and closed at 145,390 yuan/mt. In the short run, we see support below at 143,000 yuan/mt with resistance at 146,500 yuan/mt.