SMM Evening Comments (Jan 31)

SHANGHAI, Jan 31 (SMM) – SHFE nonferrous metals increased for the most part on Thursday January 31 as the US dollar dipped to the lowest since mid-January. Zinc led the rises and gained almost 2%. Nickel went up some 1%, copper jumped some 0.7%, aluminium grew 0.3%, tin nudged up, while lead fell almost 0.9%. 

The ferrous complex also ended mostly higher as coking coal surged 4.3%, iron ore jumped 1.8%, coke increased 0.8%, while rebar and hot-rolled coil slid some 0.4%. 

Copper: With continued support at the five-, 10-, and 20-day moving averages, the SHFE 1903 contract tested pressure above several times at the 48,170 yuan/mt level. It then fell and consolidated around the daily moving average, closing at 48,090 yuan/mt. Open interests shrank 6,830 lots to 172,000 lots, with shorts accounting for the majority. Despite signs that it will continue to test the Bollinger upper band, or the 48,270 yuan/mt level tonight, the contract will receive pressure from a pre-CNY buildup of inventories. 

Aluminium: Rising longs buoyed the SHFE 1903 contract to an intraday high of 13,545 yuan/mt in the second trading session of the morning. However, a lack of upward movement lowered prices in the afternoon, and ended it at 13,510 yuan/mt, still above the five- and 20-day moving averages. Open interest lost 2,838 lots to 227,000 lots. As the daily MACD red line lengthened, we expect the contract to test support at the 10-day moving average tonight. 

Zinc: The SHFE 1903 contract faced pressure at 22,000 yuan/mt in the morning, but accumulated longs buoyed it above that level in the afternoon, to a high of 22,260 yuan/mt. Support was seen at the 10-day moving average. While concerns over supply tightness contributed to the higher prices, cautious investors pre-holiday are likely to keep the contract hovering at 22,000 yuan/mt tonight.  

Nickel: The SHFE 1905 contract consolidated at highs today after four consecutive trading days of increases. With support at 97,500 yuan/mt and resistance at 98,000 yuan/mt, the contract saw a decline of longs today. This resulted in a decrease of 26,000 lots to 288,000 lots in its open interests. Capitals of 202 million yuan left all SHFE nickel contracts today, the greatest among base metals. As the KDJ indicators expanded upwards and the MACD red line lengthened, the 1905 contract is likely to hover around 98,000 yuan/mt tonight.

Lead: An outflow of capitals ahead of CNY and weak fundamentals dragged the SHFE 1903 contract below the 20-day moving average. Pressure above from all moving averages ended it at 17,410 yuan/mt, with open interests down 1,498 lots to 41,624 lots. We expect limited upward momentum in the contract before CNY. 

Tin: The SHFE 1905 contract extended its overnight downward trend this morning and dipped to a low of 147,500 yuan/mt. Support from the five-day moving average pulled up it in the afternoon, and closed it at 148,240 yuan/mt. It is likely to continue trading rangebound tonight.