SMM Evening Comments (Feb 20)

SHANGHAI, Feb 20 (SMM) – SHFE nonferrous metals, except for lead, closed higher on Wednesday February 20 with nickel leading the gains and rising 1.63%. Zinc jumped almost 1%, copper climbed 0.77%, aluminium and tin went up 0.49%.

The ferrous complex also settled higher for the most part as coke rose over 2%. Coking coal increased 0.6%, hot-rolled coil nudged up, while iron ore lost almost 2%, and rebar slid 0.87%.

Copper: The SHFE 1904 contract registered a third consecutive trading day of increase as it shrugged off pressure at the daily moving average and settled at 49,710 yuan/mt. This followed after a weaker LME copper dragged it below the daily moving average, to a low of 49,530 yuan/mt around noon. Open interest gained 7,680 lots, and this raised overall open interests in all SHFE copper contracts by 17,460 lots, to 650,000 lots. Longs accounted for most of the increase. Tonight, the 1904 contract is likely to test resistance at the 49,800 yuan/mt level. 

Aluminium: The SHFE 1904 contract regained the majority of losses from the end of the CNY holiday as it stood firm above the 10-day moving average and climbed to the Bollinger upper band today. It dipped to an intraday low of 13,460 yuan/mt in the afternoon as longs exited. It gained upward momentum near closing and settled at 13,520 yuan/mt, with open interests down 3,922 lots to 211,000 lots. Its KDJ indicators expanded upwards, and the MACD red line lengthened. Without much improvement in fundamentals, the contract is likely to test support at the 20-day moving average tonight. 

Zinc: Investors sentiment improved in the afternoon, and this lifted the SHFE 1904 contract above the daily moving average, to an intraday high of 21,645 yuan/mt near closing. With support at the five- and 20-day moving averages, it settled at 21,630 yuan/mt with open interests up 17,914 lots to 226,000 lots. We expect it to extend the robust trend above the 10-day moving average tonight. 

Nickel: Rising longs buoyed the SHFE 1905 contract, which broke initial pressure at 100,300 yuan/mt, to a high of 100,730 yuan/mt in the afternoon. It closed at 100,710 yuan/mt, with open interests up 11,000 lots to 324,000 lots. This saw some 140 million yuan of capital entering all SHFE nickel contracts, topping base metals. As the MACD red line lengthened, the 1905 contract is likely see more upward room tonight. 

Lead: An increase of 3,670 lots in open interests transferred the SHFE 1904 contract into the dominant contract today. As shorts exited after an initial buildup, the contract rebounded from lows, to around the daily moving average at noon. Support at the 16,700 yuan/mt level ended it at 16,785 yuan/mt. Tonight, it is expected to test support at 16,700 yuan/mt. 

Tin: The SHFE 1905 contract dropped after initially rose to an intraday high of 151,370 yuan/mt. However, it still closed above all moving averages, at 150,480 yuan/mt. With support below at 149,500 yuan/mt, the contract is seen hovering at highs in the short run with resistance at 151,300 yuan/mt.