SMM Evening Comments (Oct 31)

SHANGHAI, Oct 31 (SMM) – SHFE nonferrous metals, except for aluminium and nickel, closed lower on Thursday, as official data showed that China’s manufacturing activity contracted for the sixth straight month in October.

Lead and zinc fell about 0.6%, copper shed 0.4%, and tin declined 0.3%.

The ferrous complex also saw mixed performance. Coking coal dropped 1.8%, and stainless steel dipped 0.2%, while coke edged up 0.03%, hot-rolled coil gained 0.1%, rebar rose 0.5% and iron ore advanced 0.7%.

Copper: The most active SHFE 1912 contract dropped to a one-week low of 47,250 yuan/mt in morning trade, as dismal Chinese factory activity data drove investors to aggressively trim their long positions. It later recouped some losses and finished the trading day 0.38% weaker at 47,330 yuan/mt. The discount of the SHFE 1911 contract against the 1912 one remained at around 90 yuan/mt. SHFE copper has broken below the five-day moving average, with a shortened MACD red bar. Whether it could remain above 47,300 yuan/mt will come under scrutiny tonight, with a slew of economic data slated for release.

Aluminium: Under pressure from the 20-day moving average, the most traded SHFE 1912 contract seesawed during the day, and closed a tad firmer at 13,840 yuan/mt. It is expected to continue to hover in a 200 yuan/mt range tonight.

Zinc: The exit of longs knocked the most active SHFE 1912 contract below the 10-day moving average to a low of 18,900 yuan/mt in morning trade, before the contract recovered some ground to close the trading day 0.55% lower at 18,995 yuan/mt. Investors continued to move to later-dated contracts, with open interest for the January-March contracts expanding over 10,000 lots on the day. The SHFE 1912 contract is expected to continue to hover around the five-day moving average tonight.

Nickel: The most traded SHFE 1912 contract jumped to a high of 134,970 yuan/mt, before it eased to end the trading day 0.26% firmer at 133,700 yuan/mt. SHFE nickel has drawn support from the five-/20-day moving average support confluence, but faces strong resistance at 135,000 yuan/mt. Whether it could break above 134,000 yuan/mt will be closely watched tonight.

Lead: The most active SHFE 1912 contract slipped to its lowest in two months and a half at 16,520 yuan/mt in morning trade, as shorts flocked in following a plunge in LME lead. SHFE lead later clawed back some losses to end down 0.63% at 16,600 yuan/mt, keeping itself in the recent range. SHFE lead now stands near the costs for secondary lead bullion. It is unlikely to convincingly fall below 16,500 yuan/mt, unless prices of battery scrap decline.   

Tin: The most traded SHFE 2001 contract recovered somewhat from a low of 137,820 yuan/mt to close the trading day 0.26% lower at 138,340 yuan/mt. SHFE tin held at its recent levels. Support is seen at the 20-day moving average at 137,600 yuan/mt.