SMM Evening Comments (Oct 20): Shanghai nonferrous metals closed mostly higher, aluminium fell 0.57%

SHANGHAI, Oct 20 (SMM) – SHFE nonferrous metals rose for the most part on Tuesday October 20 as investors reacted to the October fixing of China’s benchmark lending rate.

Zinc, the best performer, rose 1.1%, nickel advanced 0.17%, copper went up 0.18% and tin gained 0.88%, while lead edged down 0.1% and aluminium dropped 0.57%.

A total of 103 vessels carrying 15.15 million mt of iron ore arrived at major Chinese ports during October 11-17, SMM estimates. This was up 480,000 mt from the previous week, and was up 4.65 million mt from the same period last year. The amount of arrivals in Shandong declined on the week, while those in Tangshan rose slightly.

The ferrous complex closed mixed. Hot-rolled coil advanced 0.19%, iron ore rose 0.32%, while rebar fell 0.3%.

Copper: The most-traded SHFE 2011 copper contract finished the day 0.18% higher at 51,380 yuan/mt. The Democratic Party of the US and the White House narrowed their differences on the stimulus plan, and their emotions eased. Today, the People's Bank of China (PBOC) announced latest one-year and five-year loan prime rates (LPRs), which were 3.85% for one-year loans and 4.65% for five-year loans. The quotations of the loans were the same as last month, and remained unchanged for six consecutive months. In addition, the prospect of oil demand is uncertain, and Saudi Arabia calls for preemption to eliminate the negative trend, which opens the door for OPEC to change its production increase plan, and to some extent, it is negative for copper prices. However, the US dollar index fell in choppy trading, which led the contract to fluctuate and rise. US building permits and new house starts for September and whether the contract could maintain its upward trend will come under scrutiny tonight.

Aluminium: The most-liquid SHFE 2011 aluminium contract slid to a session low of 14,725 yuan/mt and closed down 0.57% at 14,750 yuan/mt. Open interest fell 4,495 lots to 128,000 lots. Inventory changes, supply delivery speed and consumption growth are the main concerns in the fourth quarter. In addition, macro fluctuations before the US election will also affect aluminum prices in the near term.

Zinc: The most-active SHFE 2011 zinc contract rose finished the day 1.1% higher at 19,370 yuan/mt. Open interest fell 6,384 lots to 70,905 lots. The contract is expected to move above 40-day moving average tonight. SMM survey showed that operating rates of domestic zinc concentrate stood at 67.7% in September, up 6.4 percentage points month on month and down 10.6 percentage points year on year.

Nickel: The most-traded SHFE 2012 nickel contract closed up 0.17% at 120,200 yuan/mt today. Open interest rose 3,071 lots to 133,246 lots. 

Lead: The most-traded SHFE 2011 lead contract fell to an intraday low of 14,180 yuan/mt and ended the day 0.1% lower at 14,365 yuan/mt. Open interest rose 92 lots to 24,470 lots. Fundamental consumption is weak, and the contract has insufficient upward momentum. It is expected that the contract will fluctuate at a low level in the near term. Whether the contract could move above 14,250 yuan/mt will come under scrutiny.

Tin: The most-liquid SHFE 2012 tin contract climbed to an intraday high of 148,400 yuan/mt and ended the day 0.88% higher at 147,300 yuan/mt today. Open interest fell 974 lots to 26,775 lots. The contract fluctuated due to sluggish domestic consumption, and it is expected that it will keep fluctuating in the near term. Pressure below is expected to around 146,000 yuan/mt. Pressure above is expected to around 148,500 yuan/mt.