SMM Evening Comments (Mar 15)

SHANGHAI, Mar 15 (SMM) – SHFE base metals ended mixed on Friday March 15 as copper, aluminium, and tin nudged up, while lead slid 1.35%, nickel lost 1.08%, and zinc fell 0.96%. 

The ferrous complex closed mostly lower as hot-rolled coil dipped 1.42%, rebar dropped 0.82%, coke declined 0.28%, while iron ore jumped 1.54%, and coking coal increased 0.41%.

Copper: News about the value-added tax cuts bolstered market sentiment, and pulled the SHFE 1905 contract to a high of 49,140 yuan/mt in the morning. Exiting shorts in the afternoon again lifted the contract, to an intraday high of 49,400 yuan/mt, and ended it at 49,320 yuan/mt. Open interests lost 2,962 lots to 235,000 lots. The price spread between the SHFE March and April contracts expanded to around 1,000 yuan/mt, from 700 yuan/mt, as investors expected a lower VAT to reduce costs in back month contracts. Tonight, the most-active 1905 contract will test support at the 49,000 yuan/mt level. 

Aluminium: The SHFE 1905 contract jumped to an intraday high of 13,725 yuan/mt after China detailed the tax cut in April. It moderated but remained above all moving average and closed at 13,665 yuan/mt. The SHFE 1903 contract was delivered today, with a settlement price at 13,665 yuan/mt. We expect upward momentum in the 1905 contract to weaken tonight. 

Zinc: As longs took profits and left, the SHFE 1905 contract declined sharply from an intraday high of 22,170 yuan/mt. It found support at the 40-day moving average and closed at 21,480 yuan/mt. The tax cut news expanded backwardation of the SHFE March, April contracts to 450 yuan/mt, from 200 yuan/mt. As domestic inventories continued their growth, the 1905 contract may test support at the 20-day moving average tonight amid cautious investors. 

Nickel: The SHFE 1905 contract fell and returned to trading rangebound after it jumped to a high of 101,550 yuan/mt. Pressure from the five-day moving average remained. The contract settled at 100,540 yuan/mt, with open interests down 5,000 lots to 251,000 lots. As the MACD green line lengthened, the contract is likely to trade weakly with resistance at the five-day moving average tonight. 

Lead: The SHFE 1904 contract lost support from the 20- and 40-day moving averages as longs left, and slid to a low of 17,190 yuan/mt. This came after it hovered at 17,365 yuan/mt after opening. Open interests declined 1,812 lots to 32,972 lots, and this ended the contract at 17,200 yuan/mt. The SHFE 1903 contract was delivered with a settlement price of 17,495 yuan/mt, with a delivery volume of 8,475 mt. 

Tin: The SHFE 1905 contract regained losses from early trades, as it climbed above the daily moving average and closed at 147,360 yuan/mt. After the tax-cut incentive lifted prices today, the contract will face continued pressure from the 60-day moving average tonight. Support is set at the five-day moving average.