SMM Evening Comments (Jul 23)

SHANGHAI, Jul 23 (SMM) – SHFE nonferrous metals extended their losses with limited support from fundamentals. Nickel continued to lead the declines and slid 2.15%. Aluminium fell 1.15%, copper eased 1.05%, zinc dipped 0.13%, lead sank 0.99%, and tin shed 0.07%. 

The ferrous complex also traded lower as iron ore closed 1.73% lower, with rebar and hot-rolled coil edging down. 

Copper: Eased expectations of an aggressive rate cut by the US Federal Reserve next week kept the US dollar at highs and depressed upward momentum in copper prices. The most-active SHFE September contract lost support from the Bollinger upper band and slid to an intraday low of 47,260 yuan/mt after opening, before it pared some losses and finished at 47,300 yuan/mt, down 1.05% on the day. Pessimistic sentiment drove longs to cover their positions, and this lowered open interests in the September contract by 2,798 lots. Open interests in all SHFE copper contracts rose 2,818 lots to 576,000 lots as capitals flew in the October contract. As the KDJ indicators expanded downwards, the September contract is expected to test support from 47,200 yuan/mt tonight. 

Aluminium: Loaded-up shorts dragged the most-liquid SHFE September contract below the 20-day moving average, and exiting longs accelerated the declines in the afternoon, settling the contract 1.15% lower on the day at 13,750 yuan/mt, the lowest level today. As the market again looked at fundamentals and LME aluminium also retreated, the contract is expected to hover weakly at current levels tonight. 

Zinc: Departing shorts pushed up the most-traded SHFE September contract, but a lack of confidence in longs prevented it from exceeding 19,350 yuan/mt, and settled it 0.13% lower on the day at 19,285 yuan/mt. Weak consumption by downstream buyers grew social inventories of refined zinc and dampened confidence in long positions. The contract is expected to track its LME zinc counterpart tonight.

Nickel: The most-active SHFE October contract continued to lose gains from the previous two weeks as it fell 2.15% on the day to end at 112,980 yuan/mt, with an intraday low of 112,060 yuan/mt in early trades. As longs booked profits and exited, some 517 million yuan of capital flew out of all SHFE nickel contracts, topping the base metals. Tonight, the October contract is expected to hover weakly above 110,000 yuan/mt. 

Lead: The most-active September contract stemmed its decline from the previous session as it consolidated around the daily moving average within a narrow range, ending 0.99% lower on the day at 16,455 yuan/mt. It is expected to trade with support from 16,400 yuan/mt tonight. 

Tin: The most-liquid SHFE September contract climbed swiftly to an intraday high of 135,600 yuan/mt in the afternoon, before it closed 0.07% lower on the day at 134,660 yuan/mt. With support from the five- and 10- day moving averages, or the 132,000 yuan/mt level, the contract is expected to trade with resistance from 137,500 yuan/mt tonight.