SMM Evening Comments (Jul 5)

SHANGHAI, Jul 5 (SMM) – SHFE nonferrous metals, except for aluminium, closed higher on Friday, as the US dollar firmed up ahead of the release of the US nonfarm payroll data, which may provide clues to the Federal Reserve's interest rate decision at its July monetary policy meeting.

Zinc led the losses with a drop of 1.2% in zinc. Copper fell 0.4%, lead shed 0.3%, nickel lost 0.1% and tin dipped 0.04%.

The ferrous complex, except for coke, traded lower. Iron ore extended its sharp decline, hitting the lower daily limit before closing 5.9% lower. Rebar dropped 1.2%, hot-rolled coil declined 1%, and coking coal slipped 0.3%.

Copper: The most active SHFE September contract slipped during the day, losing 0.39% to close at 46,320 yuan/mt. Poor spot trades and bearish technical indicators will weigh on copper prices. Strength at the 46,300 yuan/mt level will come under scrutiny tonight.

Aluminium: As longs took profits, the most traded SHFE August contract erased some of overnight gains to close the trading day 0.36% higher at 13,790 yuan/mt. Demand weakened, while aluminium producers were not keen to recover production. Falling social inventories of primary aluminium ingots will continue to support aluminium prices, but declining prices of alumina and anodes will take a toll. SHFE aluminium is expected to remain weak and trade rangebound.

Zinc: The most active SHFE September contract pared earlier gains but failed to recover from overnight losses and closed the trading day 1.15% lower at 19,295 yuan/mt. This marked a second straight day of decline, and sent the contract below all short-term moving averages and near the lower Bollinger band. Downbeat economic data from major economies grew concerns about demand. This, together with weak fundamentals, drove zinc shorts to aggressively load up their positions, and led to a sharp decline in prices on the day. Continued declines in social inventories of refined zinc across Shanghai, Guangdong and Tianjin, showed SMM data, however, offered some support. Strength at the lower Bollinger band is under scrutiny tonight.

Nickel: The SHFE August contract rebounded after touching an intraday low of 97,340 yuan/mt, to end the trading day 0.13% lower at 98,030 yuan/mt. The contract faces resistance from several moving averages and the middle Bollinger band. Whether it can hold onto its ground at 98,000 yuan/mt level is key to watch tonight. The September contract became the most traded SHFE nickel contract today.

Lead: The most liquid SHFE August contract fell to an intraday low of 15,975 yuan/mt in morning trade before it traded rangebound in the rest of the trading hours to close 0.25% lower at 16,010 yuan/mt. With a falling LME counterpart, SHFE lead is expected to continue to test support at the 16,000 yuan/mt level tonight.

Tin: As both shorts and longs trimmed their positions, the most active SHFE September contract hovered in a tight range to finish the trading day lower at 134,000 yuan/mt. Support is seen at 132,500 yuan/mt.