SMM Evening Comments (Jan 20): Copper lower amid holiday-thinned volumes

Published: Jan 20, 2020 18:11
But the prices were still underpinned as China's central bank moves to keep liquidity in the banking system sufficient before holiday

SHANGHAI, Jan 20 (SMM) – SHFE nonferrous metals closed mostly lower on Monday, with nickel as the laggard, ending down 1.44%. 

 

Copper shed 0.47% as transactions slowed ahead of the Chinese New Year holiday starting January 24. Aluminium fell 0.49%, tin fell 0.41%, while lead advanced 1.38%, and zinc climbed 0.27%. 

 

The ferrous complex mostly finished higher as iron ore and rebar added 0.53%, hot-rolled coil went up 0.36%, coke climbed 0.7%, while stainless steel eased 0.22%.

 

Copper: The most-traded SHFE 2003 contract consolidated around 49,100 yuan/mt and closed 0.47% lower on the day at 49,100 yuan/mt, as longs covered their positions before the CNY holiday. But the prices were still underpinned by overall upbeat sentiment as China's central bank moves to keep liquidity in the banking system at a reasonably sufficient level before the holiday. The People’s Bank of China (PBOC) pumped 200 billion yuan (about $29.03 billion) into the financial system via reverse repos and keep the one year and five-year loan prime rates unchanged for January.

 

The SHFE contract has lost support from the 40-day moving average, with open interest shrinking 2,101 lots to 139,000 lots. Transactions volumes declined 11,000 lots to 66,000 lots. Technical indicators suggested limited upward momentum in the contract, which is likely to test support from 49,000 yuan/mt tonight. 

 

Aluminium: The most-traded SHFE 2003 contract continued to retreat amid a withdrawal of funds and weakened demand pre-holiday. The contract hit an intraday low of 13,175 yuan/mt before ended down 0.49% on the day at 14,210 yuan/mt. Prices are expected to extend their weak and sideways trend tonight. 

 

Nickel: The most-liquid SHFE 2003 contract hovered in a tight band and extended its decline from the prior session with a drop of 1.44% today, ending at 108,100 yuan/mt. It moved close to the Bollinger lower band and may stay rangebound tonight. 

 

Lead: The most-liquid SHFE 2003 contract rose on Monday despite holiday-thinned spot transactions, as lower social inventories of lead ingot drove longs to aggressively load up positions. The contract climbed above the 60-day moving average and ended up 1.38% on the day at 15,470 yuan/mt, after hitting an intraday high of 15,510 yuan/mt. However, current fundamentals may unlikely to sustain a price rally, and investors should remain cautious before holidays.

 

Tin: The most-active SHFE 2006 contract recovered after fell, closing down 0.41% on the day at 139,920 yuan/mt, extending the decline from the previous session. Support below is seen from the 10-day moving average, or 138,200 yuan/mt tonight.  

 

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM‘s internal database model. They are for reference only and do not constitute decision-making recommendations.

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