SMM Evening Comments (Aug 16)

SHANGHAI, Aug 16 (SMM) – Nonferrous metals fell across the board as SHFE zinc led the losses and closed 3.7% lower. Copper slumped 2.6%, lead plunged 2.3%, nickel lost 1.7%, aluminium dipped 1.1%, and tin went down nearly 1%.

The ferrous complex also dropped except for coke. Iron ore lost over 1.5%, hot-rolled coil slid over 1%, coking coal and rebar closed slightly lower. Coke jumped some 2.7%. 

Copper: Both LME and SHFE copper recovered part of the losses during the day as market sentiment eased slightly when the US dollar index inched down to around 96.5. The SHFE 1810 contract ceased its increase at 47,920 yuan/mt with resistance at the 48,000 yuan/mt level. It closed at 47,580 yuan/mt, down 1,260 yuan/mt from Wednesday, with open interests up 14,000 lots to 212,000 lots. We expect it to continue to claw back some losses while hovering above 47,500 yuan/mt tonight. Investors would take more guidance tonight from the August purchasing managers' index (PMI) for the US, eurozone, and Germany. 

Aluminium: The SHFE 1810 contract closed below the five- and 10-day moving averages at 14,440 yuan/mt. This came after it climbed gradually to a high of 14,510 yuan/mt as the US dollar softened. It is expected to hover at low levels in the short run given pessimistic market sentiment. It may continue to test support at the 40-day moving average tonight. 

Nickel: Rising LME nickel prices pushed the SHFE 1811 contract up to a high of 109,770 yuan/mt at noon. With resistance at 110,000 yuan/mt, the contract closed at 109,150 yuan/mt, 1,910 yuan/mt lower from Wednesday. Some 104 million yuan of capital exited across all SHFE nickel contracts during the day. As the KDJ indicators expanded downwards and the MACD line changed from red to green, the 1811 contract is expected to hover weakly around 108,500 yuan/mt tonight.

Zinc: The SHFE 1810 contract lacked upward momentum after it rose sharply to a high of 20,160 yuan/mt at noon as shorts exited. It lost 640 yuan/mt from a day earlier to close at 19,860 yuan/mt. Open interests declined 2,014 lots to 221,000 lots. We see it consolidate at the current level tonight. 

Lead: The SHFE 1809 contract recovered some losses overnight as it jumped to 17,920 yuan/mt at noon amid exiting shorts. With open interests down 4,456 lots to 48,092 lots in the 1809 contract, the dominant contract is likely to be shifted tonight or tomorrow. 

Tin: With a softer US dollar and a rising LME tin, the SHFE 1809 contract rebounded from a low of 141,000 yuan/mt, and recovered nearly all the losses during the night trading session. It closed at 142,730 yuan/mt, still 1,370 yuan/mt lower from Wednesday. The dominant 1901 contract registered a similar movement compared to the 1809 contract. As the US dollar stays at highs, the contract is likely to face continued pressure with support at 140,000 yuan/mt and resistance at 144,500 yuan/mt.