SMM Evening Comments (Jul 17)

SHANGHAI, Jul 17 (SMM) – SHFE nonferrous metals, except for copper and aluminium, closed higher on Wednesday. Nickel remained the best performer, with a gain of close to 3.5%. Lead rose 0.8%, zinc advanced 0.6% and tin increased by 0.4%.

The ferrous complex, except for iron ore, ticked up. Coke climbed 1.5%, hot-rolled coil gained 0.6%, rebar rose 0.3% and coking coal advanced 0.2%.

Copper: The most active SHFE September contract slipped to an intraday low of 46,760 yuan/mt before it recovered some ground to close the trading day 0.19% lower at 46,860 yuan/mt. The load-up of short positions primarily accounted for today’s losses in prices. The US dollar rose after upbeat US retail sales data tempered expectations of aggressive policy easing by the Federal Reserve later this month, which eroded upward momentum in copper. Whether the SHFE 1909 contract could remain above the 46,800 yuan/mt level is crucial to watch tonight.

Aluminium: The most traded SHFE September contract recovered from earlier losses to close flat at 13,885 yuan/mt. Aluminium fundamentals remain unchanged in the short term, with headwinds from lower alumina prices and weaker consumption in a low season, and tailwinds from an anticipated pick-up in consumption at the end of the third quarter. SHFE aluminium is expected to remain rangebound in the short run. SMM will release its weekly data on social inventories of primary aluminium ingots on Thursday, which will provide some direction for the market.

Zinc: A buildup of short positions dragged on the most active SHFE September contract to 19,370 yuan/mt in early morning trade before the contract traded rangebound in remaining trading hours to close 0.57% higher at 19,355 yuan/mt. Market focus turned to fundamentals from macroeconomic developments. Growing expectations of higher inventories and weaker consumption in a low season weighed on zinc longs, and today’s gains in prices was primarily caused by the unwinding of short positions. The contract is expected to trade around the 20-day moving average tonight.

Nickel: As longs added their positions, the most traded SHFE October contract climbed in afternoon trade to finish the trading day 3.45% higher at 111,420 yuan/mt. About 256 million yuan flowed into the SHFE nickel complex on the day, the most among nonferrous metals. The contract is expected to trade above 110,000 yuan/mt tonight.

Lead: Under pressure from the daily moving average, the most active SHFE September contract hovered around 16,295 yuan/mt during the day, holding onto overnight gains to end 0.8% higher at 16,305 yuan/mt. This suggested strong resistance from the 16,300 yuan/mt level. The contract is expected to remain under pressure tonight, with a potential for a drop after staying at highs for long.

Tin: The most liquid SHFE September contract strengthened during the day, recovering from overnight losses to close 0.36% higher at 134,160 yuan/mt. Support is seen at 132,000 yuan/mt.