SMM Evening Comments (Jan 2)

SHANGHAI, Jan 2 (SMM) – Nonferrous metals and the ferrous complex ended in negative territory on the first trading day of 2019.

Among the nonferrous complex, nickel saw the biggest loss of close to 2%. Aluminium tumbled 1.5%, zinc dropped 1.3%, copper slid over 1%, lead dipped 0.03% and tin edged down 0.01%.

Coking coal slumped 2.5%, hot-rolled coil dropped 1.5%, iron ore declined 0.6%, rebar slipped 0.5% and coke lost 0.4%.

Copper: After a lower open, the SHFE 1902 contract extended its losses during the day and closed 1.02% lower at 47,680 yuan/mt. Open interest for the March contract exceeded that for the February contract, and the 1903 contract became the most liquid SHFE copper contract. The 1903 contract performed similarly to its 1902 counterpart today and finished 1.08% lower at 47,620 yuan/mt. 

Aluminium: As shorts significantly loaded up their bets, the SHFE 1902 contract fell to 13,385 yuan/mt today, a low since the end of January 2017. It ended 1.54% lower at 13,395 yuan/mt. Downbeat economic data and gains in social inventories over the New Year’s Day holiday unnerved the market. The contract is unlikely to rebound significantly tonight.

Zinc: The SHFE 1902 contract fell to close at 20,440 yuan/mt today as longs cut their positions. A gain of 6,900 mt in social inventories of refined zinc across Shanghai, Tianjin and Guangdong over the New Year’s Day holiday and further weakening consumption will weigh on SHFE zinc prices. This, together with a sharp decline in its LME counterpart during European trading hours, is likely to send the SHFE 1902 contract to open lower tonight.

Nickel: The most traded SHFE nickel contract fell to a 14-month low of 86,210 yuan/mt today after it climbed to 88,370 yuan/mt. The May contract closed some 2% lower at 86,280 yuan/mt. Its KDJ lines diverged and expanded downwards and the MACD bar turned green. The contract is likely to struggle to hold onto the 86,200 yuan/mt level tonight.

Lead: The SHFE 1902 contract surged to a high of 18,130 yuan/mt shortly after opening as longs aggressively added their bets. The contract lost those gains later and closed lower at 18,000 yuan/mt. The uptrend in SHFE lead prices stalled, but its five-day moving average continued to climb. We expect the contract to hover around the 18,000 yuan/mt level tonight with support at the 40-day moving average.

Tin: The SHFE 1905 contract tumbled to a day-low of 142,510 yuan/mt shortly after opening. It recovered those losses in later trades and ended at 143,870 yuan/mt. Resistance was seen at the five-day moving average.