SMM Evening Comments (Sep 27)

SHANGHAI, Sep 27 (SMM) – All nonferrous metals and ferrous complex, except for SHFE tin, fell across the board on Thursday September 27 as the US dollar strengthened. 

SHFE lead slumped 1.79%, aluminium lost 1.64%, nickel slid 1.52%, copper went down 0.9%, and zinc dropped 0.4%. Coke plunged 2%, coking coal fell 1.36%, rebar dipped 1.16%, hot-rolled coil and iron ore went down nearly 0.9%.

Copper: The SHFE 1811 contract dipped to an intraday low of 50,070 yuan/mt and settled at 50,130 yuan/mt today as risk aversion made investors covered their longs ahead of the National Day holiday. Capitals of some 522 million yuan flew out of all SHFE copper contracts, topping the base metals. The 1811 contract will test support at the five-day moving average tonight. 

Aluminium: Rising shorts dragged down the SHFE 1811 contract to a one-month low of 14,350 yuan/mt near closing. A higher US dollar on Federal Reserve’s rate hikes weighed on the contract. Rusal is likely to set up a traders’ team in China for the transaction of its aluminium ingot, and this also depressed market sentiment. We expect the contract to test resistance at the 60-day moving average tonight. 

Zinc: The SHFE 1811 contract failed to stand firm above the daily moving average after it falling to a low of 21,485 yuan/mt. While short squeeze in domestic market eased a bit, it will still prevent the price from dipping too much in the short run. Tonight, the contract may receive some support from its LME counterpart, which surged during the European trading session. 

Nickel: The SHFE 1811 contract received support at the 20-day moving average after slumped to a low of 103,930 yuan/mt. Open interests fell 24,000 lots to 203,000 lots during the day, with capitals of some 262 million yuan flowing out of all SHFE nickel contracts. We expect the 1811 contract to consolidate around 104,500 yuan/mt tonight as its KDJ indicators expanded downward and the MACD red line shortened. Investors would take more guidance tonight from the US second-quarter economic growth, durable goods orders for August, and weekly initial jobless claims.

Lead: The SHFE 1811 contract led the losses across base metals contracts as it slumped 325 yuan/mt to settle at 17,840 yuan/mt. This came after it dipping to an intraday low of 17,760 yuan/mt as shorts surged. With capitals flowing out before the National Day holiday, the contract is likely to remain its weak trend tonight. 

Tin: Expectations on shutdown of mineral processing plants in Gejiu of Yunnan province buoyed the SHFE 1901 contract when a stronger US dollar weighed on other base metals. The contract surged to a high of 148,420 yuan/mt before noon as investors cut their shorts and added longs. It is likely to sustain its robust trend in the short run with resistance above at 150,000 yuan/mt.