SMM Evening Comments (Sep 19)

SHANGHAI, Sep 19 (SMM) – SHFE nonferrous metals broadly ended in the black on Wednesday. Zinc soared over 4%, copper surged 2.6%, nickel and lead rose over 1%, aluminium gained close to 0.5% and tin inched up 0.27%.

The ferrous complex, except for hot-rolled coil, also ended in positive territory across the board. Coke and coking coal increased over 1%, rebar popped 0.31% and iron ore edged up 0.2%.

Market participants tonight can take some guidance from US weekly mortgage applications and crude stocks, and new housing starts in August. The European Central Bank President Mario Draghi would deliver a speech at a conference in Berlin.

Copper: The SHFE 1811 contract held onto overnight gains during the day and closed at 49,640 yuan/mt. It managed to stand above the 60-day moving average, shrugging off its previous pattern of trading rangebound at low levels. The US-China trade disputes have temporarily receded from the spotlight; large amounts of liquidity injection this week and anticipated consumption boom ahead of holidays bolstered the market sentiment. We expect the contract to climb to test 50,000 yuan/mt tonight.

Aluminium: As shorts covered and longs built their positions, the SHFE 1811 contract increased to an intraday high of 14,575 yuan/mt before it slid to end at 14,535 yuan/mt. Open interest for the October and November contracts shrank more than 160,000 lots, compared to a 10,716-lot decline in open interest for the SHFE aluminium complex. China said on Tuesday that it plans to increase infrastructure spending, which boosted the morale across the market. Technically, the 1811 contract’s KDJ lines expanded upwards and MACD green line shortened. We expect it to upwardly test the 10- and 40-day moving averages tonight.

Zinc: The SHFE 1811 contract jumped past a previous high at 21,650 yuan/mt to an intraday high of 21,655 yuan/mt. This helped the most liquid SHFE zinc contract to recover all the losses it had made since August 10. About 365 million yuan entered the SHFE zinc complex today, compared to 340-million-yuan inflows to the nonferrous complex. Price spreads between the October and December contract exceeded 1,000 yuan/mt. As the contract has broken through all the technical resistance, it is likely to extend its gains to test 21,850 yuan/mt tonight.

Nickel: The SHFE 1811 contract rose to end at 103,340 yuan/mt after it initially fell to 101,520 yuan/mt. On the technical front, its KDJ lines expanded upwards and MACD line turned red. We expect it to hover around 103,000 yuan/mt tonight.

Lead: The SHFE 1811 contract shrugged off its overnight weak performance and climbed to an intraday high of 18,580 yuan/mt during the day. As some shorts built their positions, the contract edged down to close at 18,480 yuan/mt. Open interest for the contract grew 2,588 lots to 51,968 lots. We expect the contract to test pressure at 18,500 yuan/mt tonight.

Tin: The SHFE 1901 contract clawed back all its early losses to end at 144,670 yuan/mt after it plummeted to an intraday low of 142,310 yuan/mt. Shorts took profits and liquidated their positions after their early buildup of positions. This accounted for the volatile performance seen during the day. The contract remained in a rangebound pattern with support at 142,500 yuan/mt and resistance at 145,500 yuan/mt.