SMM Evening Comments (Sep 12)

SHANGHAI, Sep 12 (SMM) – SHFE nonferrous metals, except for lead, closed higher on Thursday, on signs of a thaw in the trade tensions between Washington and Beijing.

Tin led the increases with a gain of 1.1%, nickel rose 1%, zinc and copper advanced close to 0.6%, and aluminium climbed 0.2%.

The ferrous complex was also broadly higher. Iron ore remained the best performer, and gained 3.7% on the day. Rebar and coke rose 2.1%, hot-rolled coil increased by 1.5%, and coking coal crept up 0.7%.

The SHFE will close from tonight for the Mid-Autumn Festival holiday, and reopen on Monday.

Copper: As longs added their positions, the most active SHFE 1911 contract climbed during the day, after plumbing a five-day low of 47,010 yuan/mt overnight. It finished the trading day 0.55% higher at 47,490 yuan/mt. The spread between the 1909 and 1910 contracts has flipped into backwardation structure. Positive technical indicators will offer support to SHFE copper.

Aluminium: The most traded SHFE 1911 contract traded rangebound during the day, holding onto high levels to end the day 0.24% up at 14,425 yuan/mt. SMM data showed that social inventories of primary aluminium in China have fallen below 1 million mt. This, together with expectations for greater supply pressure after November, led to the backwardation on SHFE aluminium. The premium for the 1909 contract over the 1911 contract rose to 110 yuan/mt. SHFE aluminium is expected to continue to strengthen next week, on improving consumption and falling inventories. The contract is likely to move between 14,350-14,650 yuan/mt.

Zinc: The most active SHFE 1911 contract rose during day, recovering some ground from a decline off a six-week high of 19,375 yuan/mt hit at the start of overnight trade. It gained 0.57% on the day to end at 19,245 yuan/mt. SMM data showed that social inventories of refined zinc across Shanghai, Guangdong and Tianjin fell this week, but lingering expectations of higher inventories drove some longs to exit from the market today. The discount for the 1910 contract against the 1911 contract fell to 5 yuan/mt.

Nickel: Short-covering bolstered the most traded SHFE 1911 contract to an intraday high of 144,820 yuan/mt shortly before closing. The contract gained 0.98% on the day to end at 144,730 yuan/mt. It remained above the five-moving average, but met strong resistance at the 145,000 yuan/mt handle.

Lead: The most active SHFE 1910 contract eased after hitting an intraday high of 17,490 yuan/mt in early morning trade, as longs covered their positions ahead of the holiday-extended weekend. This also suggested strong pressure at the 17,500 yuan/mt level. SHFE lead ended the day 0.26% lower at 17,345 yuan/mt. Four consecutive days of moderate losses flattened the five- and 10-day moving averages, while the exit of longs deterred the weekly K line from further expanding upwards. Potential production restrictions in Henan and Hebei ahead of the October 1 National Day parade in Beijing will remain closely watched, after traders return from the holiday.  

Tin: The most liquid SHFE 2001 contract traded rangebound during the day, holding onto overnight gains to end 1.14% higher at 141,650 yuan/mt. Resistance is seen at 142,500 yuan/mt, while support is at 138,500 yuan/mt.