SMM Evening Comments (May 22)

SHANGHAI, May 22 (SMM) – SHFE nonferrous metals, except for lead, closed lower on Wednesday, with the biggest loss of 1.2% in copper. Aluminium fell close to 1%, zinc declined 0.9%, nickel and tin lost 0.4%.

The ferrous complex, except for coking coal, extended their gains. Coke soared close to 3.5%, iron ore jumped 3.4%, hot-rolled coil and rebar advanced some 1.7%.

Copper: The most active SHFE July contract hovered between 47,360-47,430 yuan/mt in the morning, before the addition of short positions dragged it down in afternoon trade, as risk aversion bolstered the US dollar and lowered LME copper below $6,000/mt. SHFE copper finished the trading day 1.15% lower at 47,160 yuan/mt. Its five- and 10-day moving averages adhered to each other and created resistance, while the KDJ lines expanded downwards and crossed, both bearish signals. The market tonight is likely to continue to seek direction from its London counterpart, and the SHFE 1907 contract is expected to try to remain above the 47,000 yuan/mt level.

Aluminium: Following a drop in LME aluminium, Shanghai longs liquidated more than 5,000 lots in afternoon trade, which pulled the most traded SHFE July contract to a low of 14,120 yuan/mt. The contract ended the trading day 0.95% lower at 14,125 yuan/mt, and is expected to remain weak and hover between 14,100-14,300 yuan/mt tonight.

Zinc: As shorts aggressively loaded up their positions, the most active SHFE July contract slid during the day, and ended the trading day 0.94% lower at 20,455 yuan/mt. Resistance appeared strong at the five- and 10-day moving averages which adhered to each other. SMM data showed that social inventories of refined zinc in Guangdong declined sharply, which might offer some support to fundamentals, but an anticipated increase in supply will limit upward momentum in SHFE zinc. The contract is expected to hover around the five-day moving average tonight.

Nickel: The buildup of short positions depressed the most active SHFE July contract below the 97,000 yuan/mt level to a low of 96,880 yuan/mt, before short-covering helped it recover some ground to close 0.42% lower at 97,510 yuan/mt. Its KDJ lines converged with a shortened MACD red bar. The contract is expected to try to remain above the 10-day moving average tonight.

Lead: The most traded SHFE July contract traded rangebound around 16,070 yuan/mt, below the daily moving average, for much of Asian trading hours. It managed to hold onto overnight gains to end 0.47% higher at 16,085 yuan/mt. With the steady five- and 10-day moving averages, the contract is expected to continue to hover around the 16,000 yuan/mt level tonight.

Tin: The buildup of short positions extended declines in the most active SHFE September contract on the day. The contract touched a 5-1/2-month low of 144,460 yuan/mt before it closed the trading day 0.4% lower at 144,670 yuan/mt. SHFE tin is expected to remain weak in the short run, with support at 144,000 yuan/mt.