SMM Evening Comments (Jan 29)

SHANGHAI, Jan 29 (SMM) – SHFE nonferrous metals declined on Tuesday January 29, on a three-year low in growth of China's industrial profits in December and weaker prices of crude oil. Aluminium led the declines and closed nearly 1% lower. Lead dipped almost 0.6%, zinc slid some 0.2%, copper, nickel, and tin lost less than 0.1%.

The ferrous complex, except for iron ore, also declined across the board. Coke closed almost 1.7% lower, coking coal fell 1.2%, rebar went down some 1%, and hot-rolled coil dropped some 0.8%. 

Copper: The SHFE 1903 contract shrugged off pressure at the daily moving average at noon, and tested the Bolliger middle band of 47,600 yuan/mt level several times, with a high of 47,670 yuan/mt. However, it settled lower on the day at 47,580 yuan/mt, with open interests down 2,694 lots to 177,000 lots. Open interests across all SHFE copper contracts accumulated 4,408 lots, with longs accounting for the majority. The price spread between the SHFE 1903 and 1902 contracts widened to some 120 yuan/mt at closing. Tonight, we expect the most-traded 1903 contract to test pressure at the 47,600 yuan/mt level.  

Aluminium: A buildup of over 1,000 lots of short positions in five minutes, together with pressure from the 40- and 60- day moving averages weighed the SHFE 1903 contract from a high of 13,465 yuan/mt in the early morning, to a low of 13,385 yuan/mt before noon. The contract fell below support at the 10- and 20-day moving averages, and closed at 13,410 yuan/mt. We expect it to continue to test support below tonight. 

Zinc: An outflow of capitals ahead of CNY lowered the SHFE 1903 contract from a high of 21,820 yuan/mt near opening, to a low of 21,525 yuan/mt before noon. It climbed gradually and closed at 21,685 yuan/mt, with open interests down 15,652 lots to 214,000 lots. As stagnated consumption grew social inventories of zinc, the contract is likely to trade weakly, rangebound with pressure at the Bollinger upper band. 

Nickel: The SHFE 1905 contract found support at the 94,000 yuan/mt level after it slumped to a low of 94,050 yuan/mt in the morning as investors cut their longs. It climbed and hovered at 95,200 yuan/mt in the afternoon, with pressure at 95,400 yuan/mt. A decline of 3,000 lots in open interests ended it slightly lower at 95,180 yuan/mt. Tonight, we expect the contract to test support at 95,200 yuan/mt. 

Lead: Longs exited the market and dragged the SHFE 1903 contract to a low of 17,620 yuan/mt around noon, as a weaker LME lead grew market worries. The contract ended at 17,645 yuan/mt with open interests down 2,814 lots to 42,904 lots. It is likely to test support at the 10-day moving average tonight. 

Tin: Resistance above from the five-, 10-, and 60-day moving averages kept the SHFE 1905 contract trade rangebound today, with a high of 148,450 yuan/mt in the early morning. It ended at 147,630 yuan/mt with open interests down 136 lots to 34,276 lots. Support below is set at 147,000 yuan/mt tonight.