SMM Evening Comments (Sep 25)

SHANGHAI, Sep 25 (SMM) – SHFE nonferrous metals increased for the most part as copper led the gains and closed 1.53% higher. Nickel grew 1.3%, zinc rose 0.51%, tin inched up, while aluminium declined 0.41%, and lead edged down. 

The ferrous complex, however, fell across the board with rebar leading the losses and dipping 1.84%. Coke lost 1.38%, iron ore slid 1%, hot-rolled coil went down 0.98%, and coking coal closed 0.16% lower.  

Copper: The SHFE 1811 contract opened at 50,300 yuan/mt and rose to an intraday high of 50,400 yuan/mt as shorts exited. When long positions also left the market, the contract received support at the 50,000 yuan/mt level. It closed at 50,360 yuan/mt with open interests falling 4,030 lots. Some 142 million yuan of capital flew out of all SHFE copper contracts, topping base metals contracts. We expect the 1811 contract to test support at its current level tonight. 

Aluminium: As investors covered their longs, the SHFE 1811 contract slid after opening and fell to an intraday low of 14,570 yuan/mt in the afternoon. It settled at 14,610 yuan/mt, with open interests down 16,516 lot to 233,000 lots. News spread that Rusal, in response to the US sanction, will set up a traders’ team in China for the transaction of its aluminium ingot. This also accounted for the decline in aluminium price. The contract may test resistance at the five-day moving average tonight. Movement in the US dollar index should be closely watched tonight. 

Zinc: As the five-day moving average provided support, the SHFE 1811 contract rallied after slumped to a low of 21,475 yuan/mt. Short squeeze in domestic market eased a bit as zinc social inventories grew on imports and arrivals from smelters and as open interests of the SHFE October contract dipped 13,700 lots. The contract may continue to hover above the Bollinger upper band tonight. 

Nickel: The SHFE 1811 contract rebounded from a low of 104,530 yuan/mt, with support at the 20-day moving average, but saw limited upward momentum. It rose near closing and settled at 105,390 yuan/mt as the US dollar weakened. We expect it to consolidate around 105,300 yuan/mt tonight as its KDJ indicators expanded upward and the MACD red line lengthened. Investors would take more guidance tonight from the US Conference Board consumer confidence for September. 

Lead: The SHFE 1811 contract regained part of the losses during the day with buoyance from the SHFE zinc contracts. It fell 0.03% to settled at 18,310 yuan/mt. With strong support at the Bollinger middle band and the 18,143 yuan/mt level, the contract may test pressure at the five-day moving average tonight. 

Tin: The SHFE 1901 contract failed to sustain its upbeat trend before the Mid-autumn festival, as it traded rangebound during the day and settled at 146,870 yuan/mt as both longs and shorts exited the market. Investors would take cues from development of the macroeconomy tonight.