SMM Evening Comments (Nov 18)

SHANGHAI, Nov 18 (SMM) – SHFE nonferrous metals, except for nickel, closed higher on the back of hopes for US-China trade deal. Tin led the gains and ended up 0.65%, copper advanced 0.23%, aluminium gained 0.8%, lead rose 0.99%, zinc grew 0.25%, while nickel slipped 1.48%. 

The ferrous complex, meanwhile, traded mixed as iron ore climbed 0.8%, rebar increased 0.59%, while hot-rolled coil lost 0.23%, stainless steel fell 0.07%, and coke shed 0.23%. 

Copper: The most-active SHFE January 2020 contract regained losses from last Friday night, buoyed by renewed hopes of a China-US trade deal and China’s move to trim a closely watched lending rate. The contract rose to an intraday high of 47,020 yuan/mt and ended up 0.23% at 46,980 yuan/mt. Officials from the US and China had “constructive talks” on trade in a high-level phone call last Saturday, according to China’s state media. Beijing surprised markets on Monday by trimming a key interest rate for the first time since 2015, stirring speculation that further stimulus was on the way for the world’s second-largest economy. Tonight, pressure from several moving averages above will likely keep the SHFE contract testing support from 47,000 yuan/mt.

Aluminium: The most-liquid SHFE 2001 contract recovered losses from the previous week, as departing shorts and rising longs amid improved market sentiment sent the contract to a high of 13,800 yuan/mt, before it ended up 0.8% at 13,795 yuan/mt. Continued decline in domestic stocks of primary aluminium suggested limited weakness in consumption. This, coupled with reports of the heating-season output curbs, also supported prices. The contract will likely to stay rangebound tonight. 

Zinc: The most-liquid SHFE 2001 contract stemmed decline at 18,200 yuan/mt after SMM data pointed to a slight decline in domestic inventories of refined zinc. The contract rebounded to a high of 18,415 yuan/mt and ended up 0.25% at 18,390 yuan/mt. There remains upside risks for zinc inventories amid expectations of greater supply and steady consumption. The backwardation structure eased with the price spread between 1912 and 2001 contracts narrowing to 70 yuan/mt. Tonight, resistance from the Bollinger lower band should be monitored. 

Nickel: The most-liquid SHFE 2002 contract extended slide from last Friday night, slipping to an intraday low of 115,020 yuan/mt before it paring some losses to finish at 117,560 yuan/mt, down 1.48% on the day. It is expected to test pressure from 118,500 yuan/mt tonight. 

Lead: Production curbs amid smog-alert in Henan province lifted the most-active SHFE 2001 contract, which climbed to a high of 16,015 yuan/mt and finished 0.99% higher at 15,885 yuan/mt. Smaller discounts of secondary lead also contributed to the price rally. However, the upside room of the contract will be limited as its LME counterpart weakened during the European trading session. Heavy pressure is expected from 16,000 yuan/mt tonight. 

Tin: The most-active SHFE 2001 contract reversed four straight days of decline with a rise of 0.65% today, ending at 135,550 yuan/mt. Short position booked profits and left, lifting prices as high as 135,760 yuan/mt today. Pressure above is expected from the 60-day moving average or 136,300 yuan/mt tonight.