SMM Evening Comments (Sep 4)

SHANGHAI, Sep 4 (SMM) – SHFE nonferrous metals closed in negative territory across the board on Tuesday September 4. Nickel slumped 2.4%, tin dropped 1.4%, zinc lost 1.1%, copper sank close to 1%, aluminium slid some 0.6% and lead dipped 0.08%.

The ferrous complex closed mixed. Rebar increased 1.3%, iron ore rose 1.1%, rebar gained 0.71% while coke slipped 0.56% and coking coal fell 0.93%.

Copper: The SHFE 1811 contract dropped to an intraday low of 47,630 yuan/mt and closed 1% lower at 47,680 yuan/mt after it climbed to 48,020 yuan/mt. The contract fell past 48,000 yuan/mt and ended in the red for six straight trading days. Some 301 million yuan entered the SHFE copper complex today, the most among nonferrous metals, as shorts dominated the market. We expect the contract to extend its losses to test previous lows tonight.

Aluminium: While the SHFE 1811 contract regained some overnight losses during the day, it ended the trading day in the negative territory, some 0.64% lower at 14,830 yuan/mt. The contract has closed lower for five consecutive trading days and now stands above the 20- and 40-day moving averages. We expect it to fall to test the 10-day moving average tonight.

Zinc: The SHFE 1810 contract closed the trading day 1.12% lower at 21,135 yuan/mt. SHFE warrants declined to 1,212 lots today. While this could provide some support to zinc prices, prices failed to climb due to pressure from the five-day moving average. We expect the contract to weaken tonight as its LME counterpart fell during European trading hours and as its KDJ lines intersected.

Nickel: The SHFE 1811 contract fell to an intraday low of 103,140 yuan/mt with pressure from the daily moving average. Confidence across longs declined as Tsingshan Holding Group invested in a new project in Indonesia and as imports entered. The contract received support at 103,000 yuan/mt and closed at 103,250 yuan/mt. As the KDJ indicators expanded downwards and the MACD green line lengthened, the contract may consolidate around 103,400 yuan/mt tonight. Investors would take more guidance tonight from the US Markit and ISM manufacturing PMI for August. Governor of the Bank of England (BoE), Mark Carney, will also speak about the BoE's decision to raise interest rates in August and its latest inflation reports.

Lead: The SHFE 1810 contract initially jumped to 19,120 yuan/mt, its highest in close to two months, before it fell to close the trading day 0.08% lower at 18,805 yuan/mt. Such downward correction after surges is a positive development. Market participants should monitor the strength at the five-day moving average. The contract is likely to trade weakly rangebound tonight.

Tin: The SHFE 1901 contract rebounded to 144,000-144,500 yuan/mt before it fell and ended the trading day 1.42% lower at 143,700 yuan/mt. Shorts aggressively added their positions given uncertainty in the macroeconomic environment. We expect the contract to remain weak in the short term with support at 142,500 yuan/mt.