SMM Evening Comments (Oct 18)

SHANGHAI, Oct 18 (SMM) – SHFE nonferrous and ferrous metals fell for the most part on Thursday. Nickel lost 1.58%, lead dipped 1.25%, aluminium went down 1.12%, tin declined 0.39%, copper dropped 0.2%, while zinc nudged up 0.79%. 

Coke plunged 2.59%, hot-rolled coil slumped 2.43%, rebar fell 1.15%, coking coal dipped 0.36%, while iron ore closed 0.68% higher. 

Copper: As longs exited the market, the SHFE 1811 contract fell from a high of 50,420 yuan/mt, and broke support at the daily moving average to settle at 50,130 yuan/mt. Open interests lost 13,850 lots to 147,000 lots, reflecting market pessimism on consumption. Some 147 million yuan of capital left all SHFE copper contracts, the most across base metals. With pressure at the five-day moving average, a shorter MACD red line, and downwardly expanded KDJ indicators, the contract will test support at 50,000 yuan/mt tonight. 

Aluminium: Some 8,000 lots of short positions entered the market in the afternoon, dragging the SHFE 1812 contract to an intraday low of 14,015 yuan/mt. It rebounded near closing, and settled at 14,140 yuan/mt. A lack of supportive news from fundamentals is likely to extend the contract's weak trend in the short run. The contract will continue to test resistance at the five-day moving average tonight. 

Zinc: The dominant contract changed to the SHFE 1812 contract today as its open interests increased 84 lots to 160,000 lots, surpassing that of the SHFE 1811 contract. Shorts weighed the 1812 contract to a low of 21,995 yuan/mt near the start of the European trading session, but the contract closed higher from Wednesday, at 22,070 yuan/mt. While the market expects spot supplies to grow in the short run, we do not expect the contract to decline significantly on the technical front. The 1812 contract may consolidate around the 22,000 yuan/mt level tonight. 

Nickel: The SHFE 1901 contract slumped to a month-low of 100,390 yuan/mt as a stronger US dollar depressed SHFE base metals for the most part. With support at 100,000 yuan/mt, the contract closed at 101,140 yuan/mt with open interests up 33,000 lots. As its KDJ indicators expanded downwards, the contract is expected to hover around 101,000 yuan/mt tonight. Key data to monitor tonight include the US weekly jobless claims. 

Lead: The SHFE 1811 contract failed to break resistance at the daily moving average, as shorts lowered it below the five-day moving average, to an intraday low of 18,480 yuan/mt. It lost 235 yuan/mt from Wednesday to close at 18,500 yuan/mt, marking the third consecutive day of decline with further downward room expected in the short run. It will test support at the 10-day moving average tonight.  

Tin: As longs took profits and left, the SHFE 1901 contract slumped after it rose, with the lowest level of the day at 147,400 yuan/mt. Support is set at 146,000 yuan/mt in the short run. The contract will continue to trade rangebound tonight.