SMM Evening Comments (Aug 8)

SHANGHAI, Aug 8 (SMM) – Nonferrous metals, except for SHFE aluminium, rose across the board as lead led the gains and closed 2.6% higher. Nickel jumped 1.9%, zinc climbed up 0.7%, tin grew 0.46%, and copper increased 0.32%. 

The ferrous complex dipped across the board as coke led the losses with a decline of 2.4%. Coking coal fell 1.5%, hot-rolled coil lost 1.1%, iron ore dropped 0.59%, and rebar edged down. 

Copper: Rising longs pulled the SHFE 1810 contract above the five- and 20-day moving averages, to a high of 49,760 yuan/mt. Market sentiment improved on faster-than-expected growth in China’s imports and exports. SHFE copper contracts attracted some 200 million yuan while some 591 million yuan of capital moved into SHFE base metal contracts on August 8. The 1810 contract will test support at the five-day moving average tonight. Investors would take more guidance tonight from the US weekly MBA mortgage applications, its weekly crude oil inventory data, and Richmond Fed President Thomas Barkin’s speech.   

Aluminium: The SHFE October contract became the most liquid contract on Wednesday August 8. Without strong support from fundamentals, the SHFE 1810 contract dipped after it touched a high of 14,520 yuan/mt, with resistance at the five-day moving average. Its open interests increased 6,672 lots to 234,864 lots during the day, with that of 1809 contract continuing to fall. We expect the 1810 contract to test pressure above at the 60-day moving average tonight. 

Zinc: The SHFE 1810 contract surged twice with buoyance from longs, to a high of 21,625 yuan/mt. It then traded rangebound above the daily moving average and gained 135 yuan/mt from Tuesday to close at 21,525 yuan/mt. As its KDJ indicator expanded upwards, the contract is likely to continue its upward trend around 21,500 yuan/mt tonight. 

Nickel: The SHFE 1811 contract jumped to a month’s high of 114,690 yuan/mt amid rising longs and low inentories. While some longs took profits and left, the contract received support at the daily moving average and closed at 114,110 yuan/mt, some 2,120 yuan/mt higher from Tuesday. Some 349 million yuan of capital flew into SHFE nickel contracts, topping contracts across base metals. Open interests of the 1811 contract rose 40,000 lots to 281,000 lots. As its KDJ indicators expanded upwards and the longer-term moving average of the MACD lengthened, the contract is likely to trade robustly around 113,800 yuan/mt tonight. 

Lead: As shorts covered their positions, the SHFE 1809 contract initially extended its overnight gains to an intraday high of 18,565 yuan/mt. As some longs covered their positions on risk aversion, the contract edged down and closed at 18,455 yuan/mt. The contract also climbed past the 10- and 20-day moving averages during the day withd its five-day moving average expanded upwards. We expect the contract to consolidate around the 20-day moving average tonight.

Tin: As shorts exited, the SHFE 1809 contract reversed its downward trend overnight and overcame resistance at the 60-day moving average, to reach a high of 147,190 yuan/mt. It is set to test pressure above at 149,000 yuan/mt in the short run.