SMM Evening Comments (Feb 14)

SHANGHAI, Feb 14 (SMM) – SHFE base metals gained on Thursday February 14. Lead jumped 1.38%, copper grew 0.69%, nickel increased 0.58%, aluminium rose 0.26%, tin and zinc nudged up.  

The ferrous complex ended mix as iron ore gained 0.72%, coke went up 0.75%, while coking coal slid 0.7%, hot-rolled coil dropped 1.07%, and rebar lost 1.44%. 

Copper: Trade hopes between China and the US rallied the SHFE 1904 contract from below the daily moving average, to an intraday high of 48,540 yuan/mt near closing. It settled at 48,490 yuan/mt, with open interests gaining 12,946 lots to 179,000 lots. Currently above the five- and 60-day moving averages, the contract found support at the 10- and 40-day moving averages. As longs entered the market, open interests across all SHFE copper contracts accumulated 16,538 lots. Tonight, we expect the most-active 1904 contract to test pressure at 48,600 yuan/mt. 

Aluminium: An increase of nearly 900 lots in open interest across longs after opening pulled the SHFE 1903 contract to an intraday high of 13,440 yuan/mt in early trades. Strong resistance above lowered it to lows around 13,360 yuan/mt, and ended it at 13,390 yuan/mt. Open interests shrank by 4,426 lots to 233,000 lots. Despite a slight increase, the K indicator remained below the 20- and 40-day moving averages. We expect weak fundamentals to keep the contract trading rangebound, weakly tonight. 

Zinc: The SHFE 1903 contract narrowed its trading range in the afternoon from early morning, and settled at 21,490 yuan/mt after it rose to a high of 21,570 yuan/mt. Open interests continued to shrink in the SHFE 1903 contract, and this may change the dominant contract tonight. As the market awaits downstream demand to resume after the CNY holiday, zinc prices may consolidate at current levels tonight. 

Nickel: A softened US dollar added to confidence in longs, bolstering the SHFE 1905 contract to a high of 99,290 yuan/mt in the morning. With resistance at the five-day moving average, it declined before noon but received support at the 120-day moving average, ending at 98,890 yuan/mt. Tonight, it is expected to hover around 98,000 yuan/mt as its KDJ indicators expanded downwards and the MACD red line shortened. 

Lead: Exiting shorts and stronger base metal contracts buoyed the SHFE 1903 contract at noon, and pulled it to a high of 16,895 yuan/mt near closing. It settled at 16,875 yuan/mt with open interests down 2,900 lots to 39,932 lots. However, pressure above from the five-day moving average is likely to erode its upward momentum tonight. 

Tin: The SHFE 1905 contract traded within the 10- and 20-day moving averages today, with a high of 149,180 yuan/mt in the morning. Longs took profits and left in the afternoon, and this ended the contract at 148,600 yuan/mt, with open interests down 142 lots to 31,230 lots. As downstream buyers have yet to return completely, the contract may continue to trade rangebound with support at 147,000 yuan/mt and resistance at 149,300 yuan/mt in the short run.