SMM Evening Comments (Oct 31)

SHANGHAI, Oct 31 (SMM) – The SHFE nonferrous contracts and ferrous complexes fell across the board on Wednesday as China reported slower growth in the manufacturing purchasing managers' index (PMI) for the second straight month in October. 

SHFE copper led losses and fell 1.17%, aluminium slid 1.13%, nickel dipped 0.91%, tin lost 0.55%, zinc went down 0.43%, and lead closed 0.11% lower.  

Hot-rolled coil slumped 1.58%, rebar slid 1.24%, iron ore lost 0.84%, coke declined 0.44%, and coking coal fell 0.32%.    

Copper: The SHFE 1812 contract struggled around the daily moving average in the morning, and fell to a low of 48,960 yuan/mt in the afternoon with its weakened LME counterpart. As shorts exited near closing, the contract settled at 49,060 yuan/mt. Some 183 million yuan of capital entered all SHFE copper contracts today, the greatest among base metals contracts. The 1812 contract is likely to test support at 49,000 yuan/mt tonight. It could dip further to 48,500 yuan/mt if it fails to receive support at that level tonight. 

Aluminium: A surge of shorts, over 4,000 lots within 10 minutes, before noon lowered the SHFE 1812 contract to an intraday low of 13,935 yuan/mt. This marked the lowest since mid-July. It then hovered around 13,955 yuan/mt and settled at 13,960 yuan/mt, below the daily moving average. A weaker-than-expected Chinese manufacturing PMI and a higher US dollar fuelled market pessimism. We expect the contract to test resistance at the five-day moving average tonight, as its MACD green line lengthened and the KDJ indicators expanded downwards. 

Zinc: The SHFE 1812 contract broke pressure at the daily moving average and rose to an intraday high of 21,760 yuan/mt after shorts weighed it to a low of 21,470 yuan/mt in the morning. It still closed lower from Tuesday at 21,740 yuan/mt, with open interests down 4,838 lots. We expect the contract to trade rangebound around the Bollinger middle band tonight. 

Nickel: The SHFE 1901 contract failed to stand above the daily moving average after it hovered below that level in the morning. A weaker LME nickel in the afternoon depressed the contract to 97,430 yuan/mt, the lowest since April. The contract registered the fifth consecutive trading day of decline as it closed at 97,760 yuan/mt, with open interests up 10,000 lots. We expect it to trade rangebound at 97,000 yuan/mt tonight as its KDJ indicators expanded downwards and the MACD green line lengthened. Investors may take more cues tonight from the US ADP employment numbers for October and EIA weekly crude inventory data.

Lead: The SHFE 1812 contract rebounded from a low of 18,225 yuan/mt and regained last night’s losses as shorts took profits and left. With pressure at the five-day moving average, it closed at 18,425 yuan/mt, down 25 yuan/mt from Tuesday. Tonight, the contract will test resistance above at 18,500 yuan/mt with support at the 20-day moving average. 

Tin: A robust US dollar dragged the SHFE 1901 contract to a low of 145,280 yuan/mt right after opening. The contract then hovered at lows during the day and closed at 145,700 yuan/mt, with open interest up 792 lots to 32,122 lots. It is expected to extend its weak trend in the short run with support below at 144,000 yuan/mt.