SMM Evening Comments (Nov 7)

Published: Nov 7, 2018 17:06

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SMM Evening Comments

SHANGHAI, Nov 7 (SMM) – SHFE nonferrous metals ended the trading day in mixed performance with the greatest losses in zinc, down over 1%. Lead dropped 0.76%, nickel slid 0.51% and copper fell 0.38% while aluminium inched up 0.22% and tin gained 0.82%.

The ferrous complex ended in negative territory across the board. Rebar slumped 1.7%, coking coal lost 1.6%, hot-rolled coil slipped 0.67%, coke decreased by 0.64% and iron ore dipped 0.58%.

Copper: The SHFE 1901 contract climbed earlier today and regained some overnight losses. But a buildup of short positions dragged the contract from the 49,600 yuan/mt level and drove the contract to a three-day losing streak. Open interest for the contract gained 6,518 lots to 181,924 lots. Support was seen at the five-day moving average. Market participants should monitor if the contract can hold its ground at 49,300 yuan/mt tonight.

Aluminium: Short positions gained over 2,000 lots and depressed the SHFE 1901 contract to the day’s lows of 13,830 yuan/mt briefly after opening. The contract climbed during the day and closed at the highest in the daytime trading hours, at 13,915 yuan/mt. The contact remained weak with strong pressure at the 14,000 yuan/mt even as it ended in the black.

Zinc: As shorts added and longs covered their positions, the SHFE 1901 contract plunged past the 60-day moving average to a low of 20,570 yuan/mt. The contract crept earlier in the day until it met resistance at the 40-day moving average. By closing, it rebounded a little and ended just below the 60-day moving average. SMM data showed that zinc output in China is likely to extend gains in November and this grew confidence among shorts. But low inventories would put a floor under the market. We expect the SHFE 1901 contract to claw back some losses tonight as some shorts may take profits off the table.

Nickel: The SHFE 1901 contract hovered around 98,000 yuan/mt in the morning with pressure at 98,200 yuan/mt and support at 97,700 yuan/mt. As longs cut and shorts added their positions, the contract tumbled to a low of 96,460 yuan/mt in the afternoon. It recovered some losses by closing and ended at 97,120 yuan/mt. Its KDJ lines converged while MACD green line shortened. The contract is expected to test the 97,000 yuan/mt level tonight.

Lead: The SHFE 1812 contract posted a four-day losing streak on Wednesday and this forced it to give up most of the gains made last Thursday, with the five-day moving average expanding downwards. The contract is likely to extend its decline tonight if its LME counterpart weakens.

Tin: The SHFE 1901 contract rose during the day and closed near the day’s highs of 146,610 yuan/mt. Fewer supplies of spot cargoes improved spot prices and created steam for the futures. The contract is expected to strengthen in the short term with resistance at 147,000 yuan/mt.

Evening comments Copper Aluminium Zinc Nickel Tin Lead

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

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