SMM Evening Comments (Nov 20)

SHANGHAI, Nov 20 (SMM) – SHFE nonferrous metals, except for lead, traded lower across the board on Tuesday. Nickel dropped close to 0.8%, tin fell 0.65%, aluminium slid some 0.6%, zinc slipped 0.46% and copper lost 0.16%. Lead stayed flat.

The ferrous complex also fell across the board with coke being the biggest loser, down over 3.6% on the day. Rebar tumbled 2.86%, hot-rolled coil declined 1.3%, iron ore decreased 1.15% and coking coal sank 0.9%.

Copper: The SHFE 1901 contract reversed overnight gains to close in negative territory at 49,580 yuan/mt. Open interest for the contract decreased by 1,168 lots to 185,346 lots. While the contract snapped its three-day winning streak, overnight gains helped it stand firmly above the middle Bollinger band with the day’s highs close to the 120-day moving average. Market participants should monitor whether the contract tonight can hold on to the middle Bollinger band at 49,592 yuan/mt.

Aluminium: As shorts aggressively added their bets, the SHFE 1901 contract tumbled through the lower Bollinger band to close at 13,710 yuan/mt. This forced the contract to give up all the gains made in the previous day with its KDJ lines diverging and expanding downwards. Open interest for the contract grew 9,800 lots to 273,336 lots. We expect the contract to grope for support above 13,700 yuan/mt tonight.

Zinc: The SHFE 1901 contract initially extended overnight losses to the day’s lows of 21,340 yuan/mt as longs covered and shorts added their positions. It then regained those losses after it rebounded past the daily moving average to 21,530 yuan/mt, with support at moving averages. But the contract fell in late trading and closed at 21,485 yuan/mt. We do not expect the contract to climb above the current range as sluggish trades and inflows of seaborne materials might grow social inventories from current lows.

Nickel: While the SHFE 1901 contract rebounded from the day’s lows of 92,620 yuan/mt, it failed to pare the losses from a lower open overnight and closed at 93,310 yuan/mt. The contract now stands below the moving averages and KDJ lines converged with a shortened MACD green bar. Market participants should monitor whether the contract can avoid coming off from the 93,000 yuan/mt level tonight.

Lead: The SHFE 1901 contract fluctuated to finish the trading day at 18,300 yuan/mt, unchanged from the previous day. While shorts and longs appeared to be cautious, the contract remains on an upward trend with the five- and 10-day moving averages expanding upwards. We expect the contract to test pressure at 18,350 yuan/mt tonight, with support at the five-day moving average.

Tin: As longs aggressively cut their positions, the SHFE 1901 contract tumbled past the five-day moving average to close at 152,450 yuan/mt. The massive sell-off might erode confidence among investors and extend losses in the contract in the short term. Support is seen at 151,000 yuan/mt.