SMM Evening Comments (Sep 7)

SHANGHAI, Sep 7 (SMM) – SHFE nonferrous metals closed mixed on Friday. Zinc rose 0.37%, lead gained 0.27%, copper edged up 0.13% while aluminium slipped 0.37%, tin fell 0.57% and nickel tumbled 1.66%.

The ferrous complex also saw mixed performance. Rebar increased 1.53% with iron ore up 0.5% and coking coal up 0.47%. Hot-rolled coil dipped 0.12% and coke plunged 2.04%.

Copper: The SHFE 1811 contract recovered some losses to end in the black at 47,560 yuan/mt after it tumbled to an intraday low of 47,400 yuan/mt. We expect it to try to stand firmly above the five-day moving average tonight. Market participants tonight can take some cues from the eurozone’s gross domestic product (GDP) growth for the second quarter and US unemployment rates and nonfarm payrolls for August.

Aluminium: The SHFE 1811 contract dropped to end in negative territory at 14,655 yuan/mt after it crept to an intraday high of 14,755 yuan/mt. The surge follwed news that workers would extend their strike at Alcoa’s alumina operations in Western Australia and that European consumers would avoid signing supply agreements in Berlin with Rusal for 2019. On-month spreads continued to narrow. We expect the contract to rise to test the five- and 20-day moving averages tonight.

Zinc: The SHFE 1811 contract fell below support at the five-day moving average and dipped to an intraday low of 20,455 yuan/mt, affected by its weakened LME counterpart. It closed at 20,605 yuan/mt with open interests up 656 lots to 190,000 lots. There was significant pressure at the 10- and 40-day moving averages above, but the contract is unlikely to dip much in the short run given current low inventories in major domestic markets and in the Shanghai bonded area.

Nickel: As shorts aggressively added their positions, the SHFE 1811 contract plummeted to the lowest in close to six months at 100,510 yuan/mt before it regained some losses and closed at 101,100 yuan/mt. The contract lost the most among nonferrous metals today, with a decline of 1.66%. Technically, its KDJ lines diverged while the MACD green line lengthened. We expect it to hover around 101,500 yuan/mt tonight.

Lead: The SHFE 1810 contract climbed to an intraday high of 18,755 yuan/mt after it fell to an intraday low of 18,520 yuan/mt. It then came off to the daily moving average and closed at 18,645 yuan/mt. Support was seen at 18,500 yuan/mt while resistance was seen at the five-day moving average. We expect it to hover between the two levels tonight.

Tin: With a massive buildup of shorts, the SHFE 1901 contract tumbled to an intraday low of 143,200 yuan/mt before it closed at 143,510 yuan/mt. The contract is likely to approach its previous lows with support at 142,500 yuan/mt.