SMM Evening Comments (Oct 28)

SHANGHAI, Oct 28 (SMM) – SHFE nonferrous metals, except for lead and nickel, closed higher on Monday. Zinc led the gains with a 1.7% increase. Tin rose 0.4%, copper inched up 0.2% and aluminium nudged up 0.07%.

The ferrous complex traded mixed. Stainless steel advanced 0.5%, and rebar gained 0.2%, while iron ore and hot-rolled coil dipped close to 0.1%, coking coal fell 0.7% and coke dropped 1.8%.

Copper: The most active SHFE 1912 contract climbed to a high of 47,640 yuan/mt in early morning trade, near a nearly six-week high of 47,670 yuan/mt it hit last Friday, before it eased on the aggressive loading up of short positions, as euphoria around deeper OPEC production cut prospects faded and as concerns about the world economy resurfaced amid Brexit limbo. The contract ended the trading day 0.15% higher at 47,430 yuan/mt, seeing a larger premium of 90 yuan/mt over the SHFE 1911 contract. Whether the SHFE 1912 copper contract could remain above 47,400 yuan/mt will be closely watched tonight.

Aluminium: The most traded SHFE 1912 contract held in a wide range around 13,825 yuan/mt during the daytime session, where it finished the trading day marginally higher. It remained under pressure from the 20-day moving average, but held above 13,810 yuan/mt. Currently firm spot premiums will subdue bearish sentiment, deterring SHFE aluminium from rapidly falling on expectations of weaker consumption. SHFE aluminium is expected to remain rangebound and test 13,800 yuan/mt tonight.  

Zinc: The most active SHFE 1912 contract climbed during the daytime session, extending Friday night’s gains to end 1.68% higher at 19,110 yuan/mt. Short-covering mainly accounted for today’s gains in SHFE zinc, as a strong LME zinc and a decline in China social inventories over the weekend dented morale among shorts. Resistance at the upper Bollinger band will come under scrutiny tonight.

Nickel: The most traded SHFE 1912 contract dropped to an intraday low of 131,230 yuan/mt during the daytime session, before it clawed back some losses to end down 0.83% at 132,080 yuan/mt. SHFE nickel faces immediate resistance from the 20-day moving average, and could hardly find support from other moving averages. Whether it could cling to the 132,000 yuan/mt level will come under scrutiny tonight.

Lead: The most active SHFE 1912 contract initially rose to a three-day high of 16,810 yuan/mt in early morning trades, before it gave back all those gains to close the day flat at 16,700 yuan/mt. SHFE lead will hover between 17,000-16,600 yuan/mt in the near term, on track for a general downtrend given weak fundamentals. Compared to LME lead, SHFE lead is likely to see smaller declines, supported by potential arbitrage trades between Shanghai and London markets.

Tin: The most traded SHFE 2001 contract crept up to a one-week high of 139,680 yuan/mt in afternoon trades, before it relinquished some gains to close 0.43% higher at 139,020 yuan/mt. The buildup of long positions contributed to today’s gains in SHFE tin, which has yet to move out of its recent range. Whether SHFE tin could convincingly break above 140,000 yuan/mt is the key thing to watch in the short term.