SMM Evening Comments (Aug 23)

SHANGHAI, Aug 23 (SMM) – SHFE nonferrous metals closed mostly higher on Friday. Nickel rose 0.6%, lead advanced 0.3%, zinc gained 0.2%, and copper inched up 0.06%, while aluminium fell 0.4% and tin dropped 0.8%.

The ferrous complex, except for coke, rose for a second straight day. Iron ore saw the biggest gain of 3.6% on the day, rebar climbed 1.2%, hot-rolled coil increased by 0.4% and coking coal advanced 0.2%.

Copper: The most active SHFE 1910 contract recovered from overnight losses to end its trading day a tad higher at 46,400 yuan/mt, as shorts exited the market. A global economic downturn and trade uncertainty will hamper downside potential in copper prices. Meanwhile, strong resistance is seen from moving averages. Whether SHFE copper could hold onto its ground at 46,400 yuan/mt is crucial to watch tonight.

Aluminium: The greater unwinding of long positions knocked the most traded SHFE 1910 contract to a four-day low of 14,240 yuan/mt, before the contract clawed back some losses to end 0.35% lower at 14,285 yuan/mt. Investors appeared to have digested the news of less capacity in operation in Shandong and Xinjiang, and moved their positions to the forward contract. While supply holds stable with capacity cuts in Sichuan offset by newly-commissioned capacity in Guangxi, rising social inventories will hurt long confidence. SHFE aluminium is expected to remain firm and rangebound.

Zinc: The most active SHFE 1910 contract climbed in afternoon trade, tracking the increase in its LME counterpart, and recovering from overnight losses to end 0.24% higher at 18,665 yuan/mt. Its MACD indicators shaped a golden cross, which suggests upward momentum in SHFE zinc, while lower inventories will dampen morale among shorts as SMM data showed that social inventories of refined zinc across Shanghai, Tianjin and Guangdong shrank 2,700 mt between Monday and Friday. The contract is expected to continue to move around the 10-day moving average tonight.

Nickel: The most traded SHFE 1910 contract fell to an intraday low of 122,170 yuan/mt, before it rallied to close 0.56% higher at 123,930 yuan/mt. About 266 million yuan flowed into the SHFE nickel complex on the day, the most among nonferrous metals. 

Lead: As longs flocked to the market, the most active SHFE 1910 contract rebounded during the day, clawing back overnight losses to close 0.32% higher at 17,140 yuan/mt. Support is strong at the 17,000 yuan/mt level. This, together with bullish technical indicators, points to steam in SHFE lead, which is likely to test 17,200 yuan/mt tonight.

Tin: Shorts dragged the most traded SHFE 2001 contract to the lowest since late 2016, at 128,920 yuan/mt in early morning trade, and the contract later recovered some ground to finish its trading day 0.84% lower at 129,730 yuan/mt. SHFE tin has fallen below 130,000 yuan/mt, with next support at 129,000 yuan/mt.