SMM Evening Comments (Oct 12): Shanghai nonferrous metals closed mostly higher, lead fell 0.87%

SHANGHAI, Oct 12 (SMM) – SHFE nonferrous metals rose for the most part on Monday October 12 as investors monitor the Chinese yuan's movements after the People's Bank of China (PBOC) announced a rule change that made it cheaper to short the yuan.

The pandemic continues to cause widespread in Europe with governments resorting to localized lockdowns to stem the spread of the virus. Spain’s government has caused controversy after it imposed a state of emergency on Madrid and the U.K. government is set to announce further restrictions for England on Monday.

Nickel, the best performer, rose 1.38%, aluminium advanced 1.35%, copper went up 0.17% and zinc gained 1.14%, while tin edged down 0.66% and lead dropped 0.87%.

SMM data showed that social inventories of refined zinc ingots across Shanghai, Tianjin, Guangdong, Jiangsu, Zhejiang, Shandong and Hebei increased 10,000 mt from last Friday October 9 to 159,000 mt as of Monday October 12. The stocks were up 29,500 mt from September 30.

The ferrous complex also traded higher. Iron ore increased 0.36%, rebar rose 0.69%, and hot-rolled coil climbed 1.39%.

Copper: The most-traded SHFE 2011 copper contract climbed to an intraday high of 51,600 yuan/mt in the afternoon trading, before finishing the day 0.17% higher at 51,520 yuan/mt. Due to the centralized expiration of labor-management agreements in overseas mines at the end of the year, the market expects that the risk of strike will increase, and investors added their long positions in advance. In addition, the pandemic continues to cause widespread in the US over the weekend, and the resumption of negotiations on the US fiscal stimulus policy improved the market's expectation of easing again. The US dollar index fell, currently moving around the 93 mark, supporting copper prices. Pressure below is around 40-day moving average. Whether the contract could maintain its upward trend will come under scrutiny tonight.

Aluminium: The most-liquid SHFE 2011 aluminium contract closed up 1.35% at 14,595 yuan/mt. Open interest rose 8,921 lots to 116,000 lots. The increase of aluminum ingots stocks was less than expectations during the holiday. As delivery was approaching, the spot premium lifted the nearby future prices. The changes of economic data and policies of various countries and the continuous inflow of funds will come under scrutiny.

Zinc: The most-active SHFE 2011 zinc contract rose to a session high of 19,500 yuan/mt, before finishing the day 1.14% high at 19,465 yuan/mt. Open interest rose 5,585 lots to 89,674 lots. Market risk appetite soared with good performance of stock market commodities, offsetting the continuous loss of decreasing social inventories. The contract is expected to move around 40-day moving average tonight.

Nickel: The most-traded SHFE 2012 nickel contract ended the day 1.38% higher at 117,080 yuan/mt today. Open interest rose 12,900 lots to 110,509 lots. The contract is expected to trade between 115000-120000 yuan/mt this week.

Lead: The most-traded SHFE 2011 lead contract finished the day 0.87% lower at 14,750 yuan/mt. Open interest rose 2,484 lots to 24,014 lots. Pressure below around 14,700 yuan/mt is still stable. Combined with the approaching delivery, the primary lead refinery tends to deliver with decreasing supply of bulk orders, and SHFE lead is likely to stop falling. The contract will test support from 14,700 yuan/mt tonight.

Tin: The most-liquid SHFE 2012 tin contract fell to an intraday low of 146,320 yuan/mt and ended 0.66% lower at 146,360 yuan/mt today. Open interest fell 2,468 lots to 27,338 lots. Pressure above is expected to around 148,500 yuan/mt. Pressure below is expected to around 145,000 yuan/mt.