SMM Evening Comments (Aug 27)

SHANGHAI, Aug 27 (SMM) – SHFE nonferrous metals, except for tin, closed higher on Tuesday, as investors calmed down after the latest round of tit-for-tat tariff hikes between Washington and Beijing had sent markets reeling.

Zinc saw the biggest gain of 1.4%, nickel climbed 1.3%, lead advanced 1%, copper rose 0.7%, and aluminium inched up 0.07%.

The ferrous complex extended their declines. Rebar tumbled 3.7%, hot-rolled coil dropped 3.3%, iron ore fell 3.1%, coke declined 1.8% and coking coal slipped 1.3%.

Copper: The most active SHFE 1910 contract extended overnight gains to 46,490 yuan/mt, before it erased some gains to end its trading day 0.65% higher at 46,380 yuan/mt. The unwinding of short positions primarily accounted for today’s gains. Lingering trade worries and a global downturn will continue to prevent copper prices from strengthening, and moving averages will also exert pressure, even as the contact has broken the five-day one. Whether SHFE copper could stand above 46,400 yuan/mt is crucial to watch tonight.

Aluminium: As longs entered the market, the most traded SHFE 1910 contract breached the 10- and 20-day moving averages to an intraday high of 14,290 yuan/mt, before it eased to close the day a tad higher at 14,250 yuan/mt. The escalation of US-China trade tensions accounted for recent losses in SHFE aluminium, but fundamentals will keep it strong.

Zinc: As shorts fled from the market, the most active SHFE 1910 contract rapidly climbed to 18,700 yuan/mt in early morning trade, and slightly extended its gains in the afternoon to end the day 1.35% higher at 18,720 yuan/mt. Trade uncertainty, the absence of substantial gains in inventories and improving downstream consumption triggered the short-covering, with open interest for the contract shrinking about 28,000 lots on the day. Weak morale among longs, however, will limit upward momentum in SHFE zinc. The contract is expected to trade under pressure from the 40-day moving average tonight.

Nickel: As longs took profits, the most traded SHFE 1910 contract relinquished gains from an uptick to 126,300 yuan/mt by midday. The contract hovered around 125,400 yuan/mt in a tight range in afternoon trade, and ended the day 1.29% higher at 125,580 yuan/mt. It has stood above the five-day moving average, and resistance from 126,000 yuan/mt will come under scrutiny tonight. It’s worth nothing that 525 million yuan flowed to the 1911 contract on the day, with open interest expanding 49,426 lots.

Lead: The most active SHFE 1910 contract rose to the highest in nearly six months, at 17,275 yuan/mt, before it eased to end the day 1% higher at 17,180 yuan/mt. SHFE lead returned above 17,000 yuan/mt, with moving averages expanding upwards. It is expected to test the 17,200 yuan/mt level tonight, along with a strengthening LME counterpart.

Tin: Shorts pulled the most traded SHFE 2001 contract to close at an intraday low of 128,020 yuan/mt, down 0.64% on the day. SHFE tin has fallen for four consecutive trading days. Support is seen at 128,000 yuan/mt, with next support at 127,000 yuan/mt.