SMM Evening Comments (Feb 26)

SHANGHAI, Feb 26 (SMM) – SHFE nonferrous metals closed lower on Tuesday February 26, with drops smaller than 1%. Zinc and nickel lost 0.75%, tin slid 0.37%, aluminium fell 0.33%, lead declined 0.26%, and copper went down 0.22%.

The ferrous complex ended mixed as hot-rolled coil gained nearly 1%, coking coal and rebar grew 0.3%, while iron ore fell 3%, and coke dropped 0.53%.

Copper: The SHFE 1904 contract rebounded above the daily moving average and held firm around the 50,160 yuan/mt level near closing, after exiting longs dragged it below the daily moving average to a low of 49,980 yuan/mt around noon. It settled at 50,190 yuan/mt, with open interests down 6,684 lots to 251,000 lots. Open interests across all SHFE copper contracts expanded by 2,658 lots, with shorts accounting for the most. With support at the five-day moving average, the 1904 contract is expected to test resistance at 50,400 yuan/mt tonight. 

Aluminium: The SHFE dominant contract ended its increase for six consecutive trading days as it faced pressure at the 60-day moving average. A buildup of open interests by 5,238 lots transferred the SHFE 1905 contract into the dominant contract today. It dipped to a low of 13,680 yuan/mt after increased in early trades, and lost gains accumulated on Monday, to settle at 13,690 yuan/mt. The contract is likely to continue to test pressure at the 60-day moving average tonight. 

Zinc: The SHFE 1904 contract fell below the daily moving average and tested support at the five-day moving average after opening. As longs entered, it climbed and returned above the daily moving average around noon. The contract closed at 21,705 yuan/mt, with open interests down 2,778 lots to 233,000 lots, as longs took profits and left near closing. Tonight, support from longs and a stronger LME zinc are likely to see the contract hovering above the five-day moving average. 

Nickel: The SHFE 1905 contract climbed from a low of 101,020 yuan/mt in the morning, and reached an intraday high of 102,390 yuan/mt as investors added their longs and covered shorts. Limited upward momentum near closing ended it at 101,900 yuan/mt, with open interests down 15,000 lots. This saw an outflow of 150 million yuan of capitals across all SHFE nickel contracts today, the greatest among base metals. Tonight, the 1905 contract is likely to test the 180-day moving average. 

Lead: Accumulated shorts weighed the SHFE 1904 contract in early trades, and kept it consolidate around 17,015 yuan/mt for the rest of the day. With support at 17,000 yuan/mt, it ended at 17,025 yuan/mt, with open interests down 2,902 lots to 46,448 lots. The contract is unlikely to break pressure at the 20-day moving average in the short run. Tonight, a lower LME lead will see the contract testing support at 17,000 yuan/mt.

Tin: The SHFE 1905 contract traded mostly below the daily moving average, or the 151,700 yuan/mt level, after it initially rose to an intraday high of 152,690 yuan/mt. Leaving longs accounted for the loss. It ended at 151,550 yuan/mt, with open interests down 604 lots. We expect it to trade rangebound with support at 151,300 yuan/mt tonight.