SMM Evening Comments (Nov 5)

SHANGHAI, Nov 5 (SMM) – SHFE nonferrous metals closed mixed on Tuesday. Copper advanced 0.5%, aluminium gained 0.4% and tin rose 0.2%, while lead shed 0.4%, zinc fell 0.5% and nickel dropped 2%.

The ferrous complex, except for stainless steel, drifted higher. Coking coal led the gains with a 2.1% increase, rebar and coke rose more than 1.7%, hot-rolled coil climbed 1.1%, and iron ore increased 0.6%.

Copper: The most active SHFE 1912 contract climbed during the daytime session, ending up 0.49% on the day at 47,250 yuan/mt, as Caixin PMIs showed that China’s services sector continued to expand in October. SHFE copper is expected to test 47,300 yuan/mt tonight, as it has stood above the 40-day moving average and the middle Bollinger band.

Aluminium: The most traded SHFE 1912 contract wavered in a tight range during the day, hitting the highest in nearly one month at 13,985 yuan/mt and holding onto overnight gains to close 0.4% firmer at 13,965 yuan/mt. Robust spot premiums are unlikely to substantially help SHFE aluminium in the short term. The SHFE 1912 contract is expected to continue to move sideways, with longs and shorts diverging at 140,000 yuan/mt.

Zinc: Tracking losses in LME zinc, the most active SHFE 1912 contract reversed earlier gains to wipe out 0.53% on the day to end at 18,915 yuan/mt, near the session-low. It boomeranged in afternoon trade, boosted by China’s central bank’s announcement to cut the interest rate on its medium-term lending facility for the first time since early 2016. Investors trimmed their long positions on the day, pointing to limited upside potential in SHFE zinc in anticipation of supply increase. Resistance at the five-day moving average will be closely watched tonight.  

Nickel: The SHFE 1912 contract extended overnight decline to the lowest in more than one week at 130,590 yuan/mt in morning trade, before it clawed back some losses to close down 2.02% at 131,170 yuan/mt. Today’s plunge has sent SHFE nickel below the middle Bollinger band and several moving averages. Whether the contract could remain above 130,000 yuan/mt will come under scrutiny tonight.

Lead: The most active SHFE 1912 contract hovered in a wide range under the daily moving average during the daytime session, and plumbed a new three-month low of 16,360 yuan/mt. It finished the trading day 0.43% weaker at 16,390 yuan/mt, registering a four-day losing streak as a pull-back in its LME counterpart and deteriorating fundamentals weighed. Lower prices of battery scrap will keep secondary lead discounts against primary lead from narrowing, undermining support to SHFE lead, which is expected to extend its decline tonight.

Tin: The most traded SHFE 2001 contract rallied from a three-week low of 136,100 yuan/mt to a session-high of 137,400 yuan/mt in afternoon trade, before it eased to close up 0.18% at 136,970 yuan/mt. SHFE tin now faces a resistance confluence of the 10- and 40-day moving averages at 138,000 yuan/mt.