SMM Evening Comments (Jul 11)

SHANGHAI, Jul 11 (SMM) – SHFE nonferrous metals, except for tin, closed lower on Thursday as US Federal Reserve Chairman Jerome Powell overnight signalled that the central bank could soon cut interest rates.

Nickel led the gains with an increase of 2.1%, copper rose 1.5%, lead grew 1.4%, aluminium advanced 0.3% and zinc inched up close to 0.1%.

The ferrous complex trade mixed. Iron dropped 1.2%, hot-rolled coil shed 0.4% and rebar lost 0.2% while coke gained 0.1% and coking coal climbed 1.3%.

Copper: The most active SHFE September contract hovered in a range of 80 yuan/mt around the daily moving average during the day, holding onto overnight gains to close the trading day 1.5% higher at 46,590 yuan/mt. The unwinding of short positions primarily accounted for today’s gains. About 401 million yuan flowed out of the SHFE copper complex on the day, as shorts fled. Aside from stronger hopes of US rate cuts, strengthened oil prices on a sharp drop in US crude supply also boosted copper prices. Technical indicators showed bullish signals, with the KDJ lines shaping a golden cross and a shortened MACD green bar. The contract is expected to try to test the 46,700 yuan/mt mark tonight.

Aluminium: The most traded SHFE August contract weakened during the day, reversing overnight gains on dovish comments from Fed’s Powell to end the trading day 0.33% higher at 13,805 yuan/mt. SMM this morning reported a rebound in social inventories of primary aluminium ingots in China this week, the first weekly increase in about four months. This, together with lower costs for alumina, electricity and anodes, will continue to weigh on SHFE aluminium.

Zinc: The most active SHFE September contract eased during the day, giving up much of overnight gains to close 0.08% higher at 19,060 yuan/mt, as the market has digested Powell’s rate cut hint and re-focused on fundamentals. Expectations of higher inventories and sluggish consumption drove traders to continue to move their positions to forward contracts, with the open interest for the September and October contracts expanding over 22,000 lots on the day. The SHFE 1909 contract is expected to remain weak tonight, with support from the 19,000 yuan/mt level. Strength at the lower Bollinger band is crucial to monitor tonight.

Nickel: The most traded SHFE September contract extended overnight gains to a four-month high of 103,880 yuan/mt shortly before it finished the trading day 2.14% higher at 103,800 yuan/mt. A total of 490 million yuan flowed into the SHFE nickel complex on the day, the most among nonferrous metals. The contract is expected to trade rangebound tonight.

Lead: The most active SHFE August contract traded rangebound around the daily moving average during the day, with pressure from the 60-day moving average and support from the 10-day one. It managed to hold onto overnight gains to end 1.38% higher at 16,105 yuan/mt, regaining its ground at the psychologically-key 16,000 yuan/mt level. The contract is expected to remain under the pressure from the 60-day moving average tonight.

Tin: As shorts added and longs trimmed their positions, the most traded SHFE September contract dropped after trading rangebound in early morning trade, to an intraday low of 132,840 yuan/mt before it ended 1.83% lower at 133,680 yuan/mt. Support is seen at 132,000 yuan/mt.