SMM Evening Comments (Sep 20)

SHANGHAI, Sep 20 (SMM) – SHFE nonferrous metals, except for copper, ended in positive territory across the board on Thursday. Zinc surged over 2%, tin jumped 1.6%, lead gained 0.6%, aluminium advanced over 0.5% and nickel inched up close to 0.4%.

The ferrous complex, however, was broadly in negative territory. Coking coal slumped 1.9%, iron ore dropped 1.4%, rebar decreased 1.2%, hot-rolled coil slid 0.9% and coke lost 0.4%.

Copper: As shorts added and short-term longs covered their positions, the SHFE 1811 contract plunged to 49,240 yuan/mt after it consolidated around 48,495 yuan/mt. Open interest for the October contract shrank 5,308 lots to 128,992 lots while that for December-February contracts grew 8,656 lots. While the contract halted its two-day winning streak, it still stood firmly above the 60-day moving average. We expect it to consolidate at current band tonight. Particular concern was that premiums in the spot market shrank today and some traders were keen to cash in at high levels.

Aluminium: The SHFE 1811 contract climbed to an intraday high of 14,585 yuan/mt before long covering dragged it to 14,530 yuan/mt. It then rebounded again to close at 14,575 yuan/mt. The contract has closed higher than open prices for three consecutive days. We expect it to upwardly test the five- and 10-day moving averages tonight.

Zinc: The SHFE 1811 contract broke through the middle Bollinger band to a high of 21,785 yuan/mt as longs aggressively added their positions. It then registered the intraday high at 21,820 yuan/mt after slight declines. The contract ended at 21,720 yuan/mt, with open interest up 3,754 lots to 223,320 lots. About 180 million yuan entered the SHFE zinc complex today, which provided a lift to the prices. Price spread between the October and December contracts widened further. On the technical front, the five-, 10- and 20-day moving averages all expanded upwards. We expect the contract to maintain its strong performance tonight.

Lead: The SHFE 1811 contract dropped to the daily moving average and ended at 18,470 yuan/mt after it rose to 18,635 yuan/mt. The contract continued to trade rangebound at high levels with strong support at the five-day moving average. We expect it to test pressure at 18,500 yuan/mt tonight.

Nickel: With support at the 10-day moving average, the SHFE 1811 contract recovered some losses to end at 102,910 yuan/mt after coming off from 103,500 yuan/mt. On the technical front, KDJ lines expanded upwards and MACD red line lengthened. We expect the contract to hover around 102,900 yuan/mt tonight.

Tin: Shorts significantly liquidated their positions and longs aggressively built their positions briefly after the opening of the market. This pushed the SHFE 1901 contract up to an intraday high of 146,270 yuan/mt. It then hovered around 146,000 yuan/mt and closed at 146,070 yuan/mt. The contract has broken through the 20- and 40-day moving averages. We expect it to remain firm in the short term with resistance at 146,500 yuan/mt.