SMM Evening Comments (Nov 4)

SHANGHAI, Nov 4 (SMM) – SHFE nonferrous metals, except for lead and tin, closed higher on Monday. Zinc and aluminium rose 0.8%, nickel gained 0.7%, and copper inched up 0.06%.

The ferrous complex also saw mixed performance. Rebar advanced 0.5%, stainless steel rose 0.4%, and hot-rolled coil climbed 0.2%, while coke fell 0.3%, coking coal shed 1%, and iron ore dropped 1.2%.

Copper: The most active SHFE 1912 contract stabilised around 47,000 yuan/mt during the daytime session, supported by optimism on the US-China trade front, and finished the trading day a tad firmer at 47,040 yuan/mt. SHFE copper remained under the pressure at the 40-day moving average, and will try to cling to its current levels tonight, as the latest SMM survey showed that operating rates across Chinese wire and cable producers maintained stable operations last month.

Aluminium: The most traded SHFE 1912 contract wavered around highs during the daytime session, after hitting a four-week high of 13,960 yuan/mt on Friday night, as investors weighed falling inventories against prospects of supply increase. It advanced 0.76% on the day to end at 13,945 yuan/mt. Investors will diverge at a higher level of 140,000 yuan/mt in the short term, as spot premiums in China drive shorts to later-dated contracts and LME aluminium has rallied significantly, but upside potential is hampered by expectations of lower costs and greater supply. Upward momentum in SHFE aluminium will depend on demand performance.  

Zinc: The most active SHFE 1912 contract fluctuated during the daytime session, extending gains from Friday night to close 0.77% higher at 19,085 yuan/mt. This came after three consecutive days of declines. The load-up of long positions accounted for today’s gain, as trade optimism, smaller-than-expected increase in social inventories in China and higher spot premiums fuelled steam in SHFE zinc. The contract is expected to remain between the middle and upper Bollinger bands tonight.

Nickel: The SHFE 1912 contract hovered in a tight range around 134,000 yuan/mt above the daily moving average during the daytime session, and ended up 0.67% at 134,230 yuan/mt. It is expected to try to remain above the five-day moving average tonight.

Lead: Shorts knocked the most active SHFE 1912 contract to a three-month low of 16,410 yuan/mt in early morning trade, before the contract rebounded to below the daily moving average as shorts took profits on a pause to the pullback in LME lead and environmental restrictions in China. SHFE lead shed 0.39% on the day to end at 16,470 yuan/mt. It is likely to extend its decline tonight, with technical indicators in a bearish bias and the discount of secondary lead against primary lead unlikely to narrow as battery scrap prices have declined.

Tin: As shorts added their positions, the most traded SHFE 2001 contract slipped to a three-week low of 136,250 yuan/mt in morning trade, before the contract recouped some losses to end down 0.52% at 136,640 yuan/mt. Support is seen at 136,000 yuan/mt.