SMM Evening Comments (Sep 5)

SHANGHAI, Sep 5 (SMM) – SHFE nonferrous metals closed mostly higher on Thursday. Tin was the best performer, with a gain of 3.2%. Zinc rose 2.3%, copper advanced 1.6% and lead increased by 0.5%, while aluminium shed 0.1% and nickel dropped 1.9%.

The ferrous complex, except for hot-rolled coil, ticked up. Iron ore rose for a fifth straight day, and gained 1.2%. Coking coal slipped 1.1%, coke declined 0.9% and rebar sank 0.7%.

Copper: The most active SHFE 1911 contract extended overnight gains to a five-week high of 47,320 yuan/mt by midday, before it relinquished some gains to finish its trading day 1.64% higher at 46,990 yuan/mt. US-China trade talk hopes and an anticipated consumption pick-up boosted copper prices, but worries linger about the state of the global economy and trade disputes. Today’s gains have pushed SHFE copper above the upper Bollinger band and moving averages. Whether the contract could cling to the 47,000 yuan/mt level will come under scrutiny tonight.

Aluminium: Profit-taking knocked the most traded SHFE 1910 contract below the five-day moving average to an intraday low of 14,310 yuan/mt in the final hour of trading, before the contract rebounded above the five-day moving average and ended 0.14% lower at 14,330 yuan/mt. SMM data showed that social inventories of primary aluminium in China dropped 27,000 mt in the first week of September, suggesting that consumption picked up in a peak season. This is expected to bolster SHFE aluminium tonight, but upside from current highs will be limited.

Zinc: The SHFE 1910 contract consolidated during the day, holding onto gains from overnight, when it hit a month-high of 19,175 yuan/mt. It gained 2.28% on the day to end at 19,050 yuan/mt. Investors moved their positions to forward contracts, with open interest for the 1911-12 contracts expanding over 17,000 lots. The 1909-10 spread flipped into contango structure. SHFE zinc is likely to follow its LME counterpart to open higher tonight, but resistance is seen at the upper Bollinger band.

Nickel: As longs aggressively trimmed their positions, the most traded SHFE 1911 contract fell below the upper Bollinger band to an intraday low of 141,510 yuan/mt in early morning trade, before it recovered some ground to close the day 1.92% lower at 142,880 yuan/mt. About 577 million yuan exited from the SHFE nickel complex on the day. Whether SHFE nickel could remain above the five-day moving average will come under scrutiny tonight.

Lead: The most active SHFE 1910 contract dropped to an intraday low of 17,225 yan/mt in morning trade, before short-covering helped it claw back those losses to end the day 0.46% higher at 17,360 yuan/mt. As longs and shorts diverged, SHFE lead continued wavering in a wide range, and the five-day moving average flattened. It is likely to rise tonight, tracking gains in its LME counterpart, but upside is limited.

Tin: The most traded SHFE 2001 contract rallied to the highest in more than two months in afternoon trade, as longs built positions on the news that major tin smelters have agreed to cut production. The contract rose to 145,090 yuan/mt, a high not seen since July, before it erased some gains to close 3.23% higher at 142,890 yuan/mt. Whether SHFE tin could steady at 142,000-145,000 yuan/mt is crucial to watch in the short term.