SMM Evening Comments (Dec 5)

SHANGHAI, Dec 5 (SMM) – SHFE nonferrous metals closed mixed on Wednesday with copper leading the declines and dipping 1.08%. Nickel fell 0.82%, aluminium lost 0.51%, while lead grew 0.74%, zinc jumped 0.45%, and tin rose 0.37%.

The ferrous complex extended their increases across the board as hot-rolled coil led the gains and surged 3.65%. Coke increased 3.45%, rebar grew 2.04%, coking coal went up 1.95%, and iron ore closed 1.4% higher. 

Copper: Pessimism across longs continue to lower open interests across all SHFE copper contracts, to 487,000 lots, from 499,400 lots on Tuesday. This resulted in a capital outflow of some 269 million yuan, the greatest across base metals contracts. The SHFE 1902 contract opened at an intraday low of 49,130 yuan/mt on Wednesday December 5. It dipped 1.2% from Tuesday but received support at the 60-day moving average. As its KDJ indicators expanded downwards and the MACD red line shortened, we expect the contract to test support at the 60-day moving average, or 49,307 yuan/mt tonight. 

Aluminium: As the market refocused on fundamentals, weak supply and demand kept the SHFE 1901 contract trading below the daily moving average, with an intraday low at 13,705 yuan/mt near closing. The contract settled at 13,715 yuan/mt with open interests up 3,530 lots to 197,000 lots. It is likely to test support at the five-day moving average tonight. 

Zinc: The SHFE 1902 contract met support at the 20-day moving average, or 20,715 yuan/mt, as it dipped twice after it rallied above the daily moving average. As investors added their longs in the afternoon, the contract tested pressure at 21,000 yuan/mt and closed at 20,975 yuan/mt. Open interests grew 6,060 lots to 191,000 lots. Despite current low-level inventories, slow consumption will provide little support for prices. We expect the contract to hover below 21,000 yuan/mt tonight. 

Nickel: The SHFE 1901 contract faced pressure at the 91,000 yuan/mt level today, but broke that level in the afternoon, to a high of 91,100 yuan/mt as shorts exited the market. It settled 750 yuan/mt lower on the day at 90,930 yuan/mt, with open interests down 4,000 lots to 199,000 lots. We expect it to consolidate above the five-day moving average tonight. Investors would take more cues tonight from the US weekly MBA mortgage applications. 

Lead: The SHFE 1901 contract consolidated at highs around 18,575 yuan/mt, with the highest level during the day at 18,595 yuan/mt. As some longs took profits and left the market, it dipped near closing and ended at an intraday low of 18,535 yuan/mt. This stood 0.35% higher from Tuesday. With significant pressure above at the 18,600 yuan/mt, we expect the contract to hover around 18,500 yuan/mt tonight. 

Tin: The SHFE 1901 contract rebounded after it dropped to a low of 144,620 yuan/mt, supported by tight supplies in domestic markets. It closed slightly higher on the day at 145,520 yuan/mt, with open interests down 1,192 lots. Pressure above is expected at the 147,000 yuan/mt level.