SMM Evening Comments (Sep 6)

SHANGHAI, Sep 6 (SMM) – SHFE nonferrous metals closed mostly higher on Friday. Copper rose 1%, lead advanced 0.8%, aluminium gained 0.3% and zinc expanded 0.2%, while tin pulled back 1% and nickel dropped 4.3%.

The ferrous complex fell across the board. Iron ore saw the biggest loss of 3.9%, hot-rolled coil dived 2.2%, rebar tumbled 1.8%, coke declined 0.7% and coking coal slipped 0.4%.

Copper: The most active SHFE 1911 contract gave back some gains from overnight trade that were bolstered by the revival of US-China trade talks and a weaker US dollar on stronger expectations for further easing from the Fed. It finished the trading day 0.98% higher at 47,450 yuan/mt, after notching a seven-week high of 47,780 yuan/mt overnight. Whether SHFE copper could cling to the 47,500 yuan/mt level will come under scrutiny tonight.

Aluminium: An over 4,000-lot buildup of long positions bolstered the most traded SHFE 1910 contract to a high of 14,430 yuan/mt, refreshing the highest since August 20, when unexpected disruptions grew concerns about supply. The contract later erased some gains to end 0.31% higher at 14,395 yuan/mt. Falling inventories and limited supply pressure shored up aluminium prices, but upside from here was limited by the slow pace of demand recovery. SHFE aluminium is expected to hover between 14,300-14,450 yuan/mt tonight.  

Zinc: The contract for November delivery became the most active SHFE zinc contract. It eased during the day, after hitting a one-week high of 19,225 yuan/mt overnight, and ended 0.24% higher at 19,025 yuan/mt. Resistance from the upper Bollinger band and shorts adding positions on inventory growth weighed on SHFE zinc. SMM data showed that social inventories of refined zinc across Shanghai, Tianjin and Guangdong dropped 5,800 mt this week. Higher inventories and subdued consumption under environmental pressure will likely dampen morale among longs. SHFE zinc is likely to follow its LME counterpart tonight.

Nickel: As longs aggressively trimmed their positions, the most traded SHFE 1911 contract dived to a four-day low of 138,080 yuan/mt in the last 10 minutes before closing, after hovering around the daily moving average, as high as 141,500 yuan/mt, for much of the day. It lost 4.29% on the day and ended at 138,590 yuan/mt. SHFE nickel has fallen below the five-day moving average and the 140,000 yuan/mt level. Whether it could remain above 137,000 yuan/mt is crucial to watch tonight. SHFE nickel will see downward correction in the short run, as longs take profits after rapid and significant gains. Stable demand from stainless steel and supply shortages after Indonesia bans ore exports will shore up nickel prices in the longer term however. SHFE nickel is expected to remain above 125,000 yuan/mt.

Lead: The most active SHFE 1910 contract climbed to a high not seen since mid-October 2018, as longs ramped up their positions on stronger expectations for production curbs ahead of the National Day holiday after Henan Jiyuan earlier this week issued informal notice that requires emission cuts. SHFE lead rose to a high of 17,590 yuan/mt, before it eased to close 0.78% higher at 17,470 yuan/mt. Strong resistance at the 40-day moving average and a potential soothing of bullish enthusiasm will cap upside in SHFE lead, which is expected to continue to hover around 17,500 yuan/mt tonight.

Tin: As longs exited, the most traded SHFE 2001 contract dropped in the last 30 minutes before closing, and ended the day 1.04% lower at 140,520 yuan/mt. Support is seen at 140,000 yuan/mt in the short term.