SMM Evening Comments (Feb 1)

SHANGHAI, Feb 1 (SMM) – SHFE nonferrous metals, except for lead, increased across the board on the last trading day before the Chinese New Year holiday, bolstered by optimism from US-China trade talks. Zinc jumped 2.17%, nickel gained 1.64%, tin rose 0.66%, copper went up 0.48%, aluminum increased 0.3%, while lead lost 0.69%. 

The ferrous complex also ended higher as iron ore soared 6.33%, coking coal surged 4.12%, coke grew 3.43%, and rebar went up over 1%. 

Copper: Exiting shorts lifted the SHFE 1903 contract from a low of 47,980 yuan/mt at noon, after lower-than-expected Chinese manufacturing purchasing managers’ index (PMI) lowered the prices in the morning. The contract shrugged off pressure from the daily moving average, and closed at 48,270 yuan/mt, with open interests down 5,764 lots to 166,000 lots. This marked the third consecutive trading day of increase in prices. Pressure above was seen at the 60-day moving average and the Bollinger upper band. Tonight, the Shanghai Futures Exchange will close for the Lunar New Year and will not reopen until Monday February 11. 

Aluminium: Chalco’s decision to expand aluminium capacity cuts dampened confidence in shorts, and this pulled the SHFE 1903 contract from a low of 13,385 yuan/mt at noon. In the final 20 minutes before closing, a decline of shorts by some 5,000 lots in open interests rallied the contract at an intraday high of 13,550 yuan/mt. It closed at 13,545 yuan/mt with open interests down 5,140 lots to 222,000 lots.  

Zinc: The SHFE 1903 contract climbed from noon with support from its stronger LME counterpart. This followed after exiting longs weighed it to a low of 22,115 yuan/mt. Social inventories of zinc accumulated by a slower pace week on week, compared with the same period a year ago, and this also supported prices. The contract closed at 22,395 yuan/mt with open interests down 22,524 lots to 177,000 lots. 

Nickel: A decline of 31,000 lots in open interests of the SHFE 1905 contract buoyed the price to a high of 99,500 yuan/mt near closing, and ended it at 99,450 yuan/mt. This following after falling longs dragged it to a low of 97,650 yuan/mt before noon. Today, the contract's KDJ indicator expanded upwards and the MACD red line lengthened. 

Lead: The SHFE 1903 contract registered the fourth consecutive trading day of decline as investors continued to cut their long positions on the last trading day before CNY. The contract dipped to an intraday low of 17,330 yuan/mt in the afternoon, and ended 120 yuan/mt lower on the day at 17,375 yuan/mt. Open interests shrank 3,338 lots to 38,286 lots. 

Tin: As both shorts and longs left the market, the SHFE 1905 contract rebounded and closed at 148,950 yuan/mt, up 710 yuan/mt on the day. Open interests lost 1,074 lots to 30,858 lots. The contract currently stood at around the five- and 10-day moving averages, with support at the 20-, and 60-day moving averages.