SMM Evening Comments (Jan 3)

SHANGHAI, Jan 3 (SMM) – SHFE base metals traded mixed on today. Lead dropped close to 1.4%, zinc slid 1.3%, copper fell some 1.2% and aluminium declined 1.1% while tin gained some 0.5% and nickel climbed nearly 1.4%.

The ferrous complex traded higher across the board. Coke jumped close to 2.8%, rebar surged close to 2%, coking coal advanced close to 1.4%, hot-rolled coil rose 1.3%, and iron ore gained 1.1%.

Copper: The SHFE 1903 contract hovered in a tight range and ended 1.2% lower at 47,310 yuan/mt due to a lower open overnight. Weak manufacturing data out of many countries accounted for the losses in copper prices. Open interest for the SHFE copper complex jumped nearly 14,000 lots to 513,168 lots and short bets accounted for the majority. The contract is likely to struggle to hold onto the 47,000 yuan/mt level tonight.

Aluminium: The March contract became the most traded SHFE aluminium contract today. The contract tumbled to a low of 13,345 yuan/mt shortly after opening as shorts added bets of over 2,000 lots. After rebounding to the 13,400 yuan/mt level, it fell to another low of 13,340 yuan/mt shortly before closing. The contract finished the trading day some 1.2% lower at 13,350 yuan/mt. The 1903 contract has seen shorts add bets for four consecutive trading days. The SHFE 1902 contract performed similarly today and closed some 1.1% lower at 13,295 yuan/mt. Growing inventories and declining costs pose challenges for SHFE aluminium, which is unlikely to substantially rebound tonight.

Zinc: The SHFE 1902 contract fluctuated to finish the trading day lower at 20,325 yuan/mt. Growing concerns of a global slowdown and weakening zinc consumption weighed on SHFE zinc prices, but support remains at the 20,000 yuan/mt level. The contract is likely to rebound tonight, trading above the 20,000 yuan/mt level.

Nickel: The SHFE 1905 contract extended overnight gains to end the trading day some 1.4% higher at 88,370 yuan/mt. It is likely to trade rangebound at 87,000-89,000 yuan/mt tonight.

Lead: The SHFE 1902 contract extended overnight losses to close 1.4% lower at 17,770 yuan/mt. As LME lead has stemmed its decline, SHFE lead is likely to see limited downside room. We expect it to hover around 17,850 yuan/mt tonight.

Tin: The SHFE 1905 contract pared some overnight gains to 143,480 yuan/mt in morning trades as shorts loaded up their bets. In the afternoon, the contract recovered those losses to close higher at 144,200 yuan/mt as longs added and shorts cut their bets. Resistance sustained at the five-day moving average.