SMM Evening Comments (Dec 18)

SHANGHAI, Dec 18 (SMM) – SHFE nonferrous metals ended mixed on Tuesday as zinc jumped 0.77%, aluminium grew 0.7%, nickel went up 0.41%, while tin lost 0.91%, copper fell 0.35%, and lead slid 0.65%.  

The ferrous complex declined for the most part as coke slumped 2.24%, hot-rolled coil dropped 0.26%, and rebar dipped 0.06%. 

Copper: The SHFE 1902 contract lost support at all moving averages, pressured by a weaker LME copper at noon. It also lost support at the 49,000 yuan/mt level as it dipped to an intraday low of 48,870 yuan/mt several times near closing. The contract ended at 48,930 yuan/mt, with open interests up 4,402 lots to 179,000 lots. Tonight, we expect it to test support at 49,000 yuan/mt. 

Aluminium: Production cuts at smelters started to tighten supplies of aluminium ingots in the market. This, coupled with large-scale purchases by traders this week, buoyed confidence across longs in the SHFE 1902 contract. The contract rebounded from a low of 13,700 yuan/mt, and rose along the five-day moving average to settle 95 yuan/mt higher on the day at 13,740 yuan/mt. Its KDJ indicator expanded upwards with the K-line breaking resistance at the 10- and 20-day moving average. The contract may manage to stand firm above the five-day moving average tonight. 

Zinc: The SHFE 1902 contract received support at 21,000 yuan/mt when longs pulled it to an intraday high of 21,220 yuan/mt after opening. Slower consumption failed to support it firmly above the daily moving average in the afternoon. A lower LME zinc during the European trading session also weighed on the contract, which settled at 21,030 yuan/mt, with open interest losing 12,634 lots. We expect the contract to hover weakly below 21,000 yuan/mt tonight. 

Nickel: The SHFE 1905 contract faced continuing pressure at the daily moving average, as it stopped increase at 90,890 yuan/mt in the morning. Exiting longs dragged it to an intraday low of 90,320 yuan/mt. However, with support at 90,300 yuan/mt, it ended 370 yuan/mt higher on the day at 90,610 yuan/mt, with open interests down some 13,000 lots. As its KDJ indicator expanded upwards and the MACD red line lengthened, we expect the contract to test support at the five-day moving average tonight.

Lead: The dominant contract moved from the 1901 to 1902 contract today, whose open interests increased 6,148 lots to 44,760 lots, with shorts accounting for most of the gains. This lowered the SHFE 1902 contract by 105 yuan/mt on the day at 17,930 yuan/mt. With support at the 60-day moving average, it is expected to test resistance at the five-day moving average tonight.  

Tin: The SHFE 1905 contract traded rangebound as it rebounded at noon after it dipped to lows around 146,250 yuan/mt in the morning. It settled 610 yuan/mt lower on the day at 146,210 yuan/mt. It will continue to trade rangebound tonight.