SMM Evening Comments (Nov 7)

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.