SMM Evening Comments (Mar 5)

SHANGHAI, Mar 5 (SMM) – SHFE base metals, except for nickel, traded lower on Monday. Copper saw the biggest loss of 1.59%, zinc dropped 1.24%, aluminium fell 1.02% with lead and tin down about 0.7%.

The ferrous complex also fell across the board. Coke tumbled 2.5%, coking coal lost 1.35%, iron ore slid 1.27%, hot-rolled coil slipped 0.79% and rebar declined 0.73%.

Copper: The May contract became the most traded SHFE copper contract overnight. It dipped to a two-week low at 49,360 yuan/mt early this morning, before it rebounded to the daily moving average at 49,540 yuan/mt. The contract ended the trading day close to 1.6% lower at 49,500 yuan/mt, below the 10-day moving average. The month-on-month spreads between the March-July contracts all flipped into backwardation structures as the government will soon cut value added tax (VAT). The SHFE 1905 contract is expected to try to hang on above the 49,300 yuan/mt level tonight.

Aluminium: The most liquid SHFE May contract failed to recover from overnight losses during the day. It lost some 1% to finish the trading day at 13,570 yuan/mt.

Zinc: The most active SHFE April contract stemmed its overnight losses and traded in a tight range during the day. It ended the trading day 1.24% lower at 21,910 yuan/mt. Investors moved their positions to forward contracts in light of the news of VAT cuts in China. The contract is expected to remain rangebound tonight as investors adjust their positions.

Nickel: SHFE nickel bucked the downtrend across the nonferrous complex. The most active May contract recovered from overnight losses to a five-month high at 105,790 yuan/mt. It ended at 105,670 yuan/mt, up 0.93% on the day. The contract is expected to continue to test the upper Bollinger band tonight.

Lead: As longs took profits to avert risk, the most traded SHFE April contract extended overnight losses to finish the trading day 0.73% lower at 17,570 yuan/mt. The contract is expected to test support at the five-day moving average tonight.

Tin: The most liquid SHFE May contract climbed in afternoon trade, recovering about half of losses from last night, to close the trading day some 0.7% lower at 149,590 yuan/mt. The planned tax cuts and unwinding of long positions accounted for losses in SHFE tin on the day.