Evening Comments (Dec 31): Copper lower in last trading day of the year

SHANGHAI, Dec 31 (SMM) – Shanghai copper prices slipped on the final trading day of 2019, marking a second straight day of losses, as investors took profits with the year drawing to an end.

SHFE copper shed 0.6% on the day. Nonferrous metals on the SHFE, except for aluminium and nickel, closed lower. Lead slipped 1.1% to lead the losses, zinc fell 0.5% and tin lost 0.4%.

The ferrous complex, meanwhile, drifted higher across the board. Stainless steel was the best performer, with an increase of 1.9%, coke jumped 1.3%, coking coal climbed 1%, hot-rolled coil gained 0.8%, rebar rose 0.7% and iron ore advanced 0.5%.

US gold futures prices, meanwhile, extended their gains to a three-month peak around $1,526/oz.

Official manufacturing Purchasing Managers' Index (PMI) released this morning showed that China’s factory activity expanded for a second straight month in December. According to the country's statistics bureau, the PMI figure for December came in at 50.2, slightly above expectations of a 50.1 reading by economists in a Reuters poll. The 50 level in PMI readings separates expansion from contraction.

On the trade front, the South China Morning Post, citing a source, reported Monday that top Chinese trade negotiator and Vice Premier Liu He is set to visit Washington this week to sign the phase one deal with the US.

The SHFE and LME will be closed tonight for the New Year’s Day holiday.

Copper: The most active SHFE 2002 contract extended overnight losses to finish the trading day 0.59% lower at 49,150 yuan/mt, the lowest close in a week. SHFE copper has lost support at the 10-day moving average, with MACD bar turning green, suggesting limited upward momentum prices.

Aluminium: The most traded SHFE 2002 contract fluctuated to close moderately higher at 14,110 yuan/mt. Investors added short positions on the 2003, 2004 and 2005 contracts, leading to a backwardation structure on SHFE aluminium. The 2002 contract is expected to move between 14,050-14,150 yuan/mt after returning from the holiday.  

Zinc: The most active SHFE 2002 contract eased during the daytime session to close the day 0.53% weaker at 17,950 yuan/mt, snapping a two-day winning streak. SHFE zinc now sees support at the middle Bollinger band, but KDJ indicators are in a death cross. Prices were weighed by expectations of inventory accumulation with spot trades weakening ahead of the Lunar New Year holiday.  

Nickel: The most traded SHFE 2003 contract slipped to the 110,800 yuan/mt level in early morning trade, before it recovered to end the day 0.58% higher at 112,130 yuan/mt. SHFE nickel was supported by a confluence of the five- and 10-day moving averages, while resistance was at the 40-day moving average.

Lead: The most active SHFE 2002 contract shed 1.08% on the day to end at 15,050 yuan/mt. It has dropped to the 15,000 yuan/mt, but remains in its recent range as expectations of stockpiling by lead-acid battery producers after the New Year’s day deterred shorts from aggressively adding bets. SHFE lead is likely to decline further if battery makers do not stockpile as expected.

Tin: The most traded SHFE 2006 contract declined 0.43% on the day to close at 134,810 yuan/mt.