SMM Evening Comments (Dec 28)

SHANGHAI, Dec 28 (SMM) – SHFE nonferrous and ferrous metals extended declines for the most part on Friday with tin leading the losses and closing 1% lower. 

Aluminium lost 0.88%, nickel fell 0.31%, copper dropped 0.12%, while lead increased 1.11%, and zinc jumped 0.48%. Rebar and coke declined over 0.5%, hot-rolled coil and coking coal edged down, while iron ore went up 0.61%. 

Copper: The SHFE 1902 contract traded weakly around the daily moving average, and ended lower on the day at 48,340 yuan/mt, though leaving shorts pulled it up to a high of 48,380 yuan/mt in the afternoon. Open interests in the contract shrank 10,388 lots. Earnings across China’s industrial firms  in November dropped for the first time in nearly three years, and this weighed on market sentiment. Support at the five-day moving average remained. We expect the contract to test resistance at 48,500 yuan/mt with support at the five-day moving average in the short run. No trading will take place tonight. 

Aluminium: Pressure above at the 60-day moving average kept the SHFE 1902 contract around 13,605 yuan/mt today. After it twice rose to an intraday high of 13,625 yuan/mt, it dipped and settled at 13,590 yuan/mt, marking the third consecutive day of decline. Falling prices of alumina and weak demand are likely to cap any increase in prices. 

Zinc: Investors cut shorts in the SHFE 1902 contract today, and this buoyed prices to a high of 20,935 yuan/mt near closing. It settled at 20,925 yuan/mt, with open interests dipping 13,454 lots. Current tight supplies in the market will support prices in the short run. 

Nickel: The SHFE 1905 contract traded rangebound today with the lowest level at 87,810 yuan/mt. Pressure above at 88,140 yuan/mt settled it at 88070 yuan/mt, with open interests down 13,000 lots to 328,000 lots. It is expected to trade around 88,000 yuan/mt in the near run as its KDJ indicator expanded downwards and the MACD red line shortened. 

Lead: A stronger LME lead and existing shorts pulled the SHFE 1902 contract above the 18,000 yuan/mt level, and ended it at 18,050 yuan/mt. Open interests shrank 3,464 lots to 52,880 lots. We expect limited upward momentum in the contract, which will continue to test support at 18,000 yuan/mt. 

Tin: The SHFE 1905 contract tested support below as accumulated shorts weighed it to an intraday low of 142,500 yuan/mt near closing. It then rebounded a bit and settled at 143,450 yuan/mt, with open interests up 2,494 lots. The contract is likely to trade weakly and test support at 143,000 yuan/mt in the short run.