SMM Evening Comments (May 23)

SHANGHAI, May 23 (SMM) – SHFE nonferrous metals, except for lead, closed lower on Thursday, with the biggest loss of 1.6% in zinc. Copper dropped 1.5%, nickel fell close to 1%, aluminium lost 0.5%, and tin slipped 0.4%.

The ferrous complex, except for iron ore, stemmed their strong performance. Coke declined close to 1.7%, coking coal and hot-rolled coil sank close to 0.9%, and rebar shed 0.6%.

Copper: The intensifying trade war between Washington and Beijing dampened market sentiment, with Shanghai copper shorts adding their positions. The most active SHFE July contract extended its overnight losses to a multi-month low of 46,550 yuan/mt, before it recovered some ground to close the trading day 1.52% lower at 46,680 yuan/mt. Some 338 million yuan entered the SHFE copper complex. Risk-averse sentiment bolstered the US dollar and weighed on copper in London and Shanghai. LME copper extended its losses after breaking the $6,000/mt level, while SHFE copper has lost all support from short-term moving averages. The market tonight is likely to continue to seek direction from its London counterpart, and the SHFE 1907 contract is expected to struggle to remain above 46,500 yuan/mt.

Aluminium: Short-covering bolstered the most active SHFE July contract to 14,160 yuan/mt, before longs profit-taking drove it to give up those gains to end the trading day 0.46% lower at 14,110 yuan/mt. Open interest for the contract shrank 4,824 lots on the day to 232,374 lots, with the liquidation of long positions accounting for the majority. The contract has fallen below the middle Bollinger band, but remained above the 40-day moving average. It is expected to remain weak and hover between 14,080-14,180 yuan/mt tonight.

Zinc: Following a decline in LME zinc in European trading hours, the most traded SHFE July contract fell to a low of 20,260 yuan/mt, before it finished the trading day 1.6% lower at 20,270 yuan/mt. SHFE zinc remained above the lower Bollinger band. Investors moved their positions to forward contracts, with open interest for the August and September contracts expanding over 6,000 lots on the day. An anticipated increase in supply from Chinese smelters and the US-China trade conflict will continue to weigh on SHFE zinc. With a weaker LME counterpart and a stronger US dollar, the SHFE 1907 contract might post a negative open tonight and test the lower Bollinger band.

Nickel: As the greenback strengthened, the most active SHFE July contract traded rangebound below the daily moving average during the day. It closed the trading day 0.98% lower at 96,640 yuan/mt, with KDJ lines converging and the MACD red bar shortened. The contract is expected to try to hang on above 96,500 yuan/mt tonight.

Lead: The loading up of long positions pushed the most active SHFE July contract to a high of 16,270 yuan/mt before strong resistance from the 20-day moving average forced it to relinquish those gains to end at 16,125 yuan/mt, up 0.31% on the day. SHFE lead continued to trade rangebound, with the five-day moving average expanding downwards. The contract is likely to struggle to break the 20-day moving average and remain rangebound tonight.

Tin: The buildup of short positions lowered the most traded SHFE September contract to a low of 144,040 yuan/mt before position-unwinding bolstered it to 144,900 yuan/mt. But the contract then came off to close at 144,420 yuan/mt, down 0.38% on the day. Weak demand and the US-China trade tensions extended declines in SHFE tin, which is expected to remain weak in the short run and test support at 144,000 yuan/mt.