SMM Evening Comments (Aug 23)

SHANGHAI, Aug 23 (SMM) – Nonferrous metals futures dipped for the most part as SHFE nickel led declines and closed 2.4% lower. Copper fell 1.2%, tin lost 0.39%, aluminium dipped 0.34%, while zinc gained 0.93% and lead jumped 1.3%.

The ferrous complex weakened across the board. Coke slid 4.2%, coking coal lost 2.7%, rebar fell 1.7%, hot-rolled coil declined 1.6%, and iron ore declined 1.3%.

Copper: The SHFE 1810 contract fell below 48,000 yuan/mt as the US-China trade dispute worsened. After a new round of US tariffs on $16 billion worth of Chinese imports took effect on Thursday, Beijing responded with levies on American goods of the same worth. A higher US dollar at 95.4 also weighed on copper prices. The contract lost 580 yuan/mt from August 22 to close at 47,990 yuan/mt. There is likely to be further downward room tonight. Investors would take more guidance tonight from the August Markit manufacturing purchasing managers’ index (PMI) data for the eurozone, Germany, and the US, US weekly initial claims, July new home sales and June Federal Housing Finance Agency (FHFA) home prices. 

Aluminium: While longs pulled the SHFE 1810 contract up to a high of 14,715 yuan/mt in the morning, concerns of escalated US-China trade tension depressed it to close at an intraday low of 14,630 yuan/mt. Open interests lost 13,286 lots to 265,000 lots. The contract is likely to test support again at the 10-day moving average tonight. We expect it to hover above the 14,500 yuan/mt level in the short run.

Nickel: With pessimistic sentiment over a trade war, the SHFE 1811 contract fell below 110,000 yuan/mt and closed at 109,380 yuan/mt. Open interests gained 10,000 lots to 268,000 lots, with shorts accounting for most of the increase. As the MACD green line shortened and the KDJ indicators expanded downwards, the contract is likely to consolidate around 110,400 yuan/mt tonight. 

Zinc: The SHFE 1810 contract failed to stay firm above the daily moving average, as support from longs failed to sustain. It stopped its decline near closing, and gained 255 yuan/mt from Wednesday to close at 20,610 yuan/mt. Pressure at the 20-day moving average is likely to weigh on the contract tonight. 

Lead: The SHFE 1810 contract surged above the 20-day moving average twice during the day, to a high of 17,975 yuan/mt. However, pessimistic sentiment dragged down the contract to close at 17,815 yuan/mt. There is likely to be downward pressure tonight, after long positions increased 935 lots and shorts rose 2,132 lots. 

Tin: With pressure from shorts, the SHFE 1901 contract declined to close around the five-day moving average. It is likely to continue this downward trend tonight, with pressure at 146,500 yuan/mt and support at 143,000 yuan/mt.