SMM Evening Comments (Jan 6): Copper fell on US-Iran tensions and China's weak service data

SHANGHAI, Jan 6 (SMM) – SHFE nonferrous metals closed mostly lower on Monday, with nickel as the laggard, ending down 1.8%. Copper shed 0.63%, lead slipped 0.14%, tin fell 0.85%, while aluminium gained 0.64%, and zinc climbed 1.59%. 

The ferrous complex traded higher as iron ore rose 0.75%, rebar grew 0.2%, hot-rolled coil advanced 0.17%, stainless steel gained 0.32%, and coke increased 0.72%. 

Copper: The most-traded SHFE 2003 contract lost its intraday gains after hit a high of 49,010 yuan/mt, ending 0.63% lower on the day at 48,760 yuan/mt as renewed safe-haven demand from the US-Iran tension depressed upward momentum of the risky assets. Traders' flight to safety drove CMX gold to its highest in more than six years on Monday, above $1,590/oz. Market sentiment was dampened after a private Caixin survey showed a greater-than-expected decline in China’s service sector output in December, and this also accounted for the lower copper prices. Shanghai copper has slipped for five consecutive sessions, below the five-day moving average. As the KDJ indicators expanded downwards, negative technical signals may see the contract testing support from 48,700 yuan/mt tonight. 

Aluminium: The most-active SHFE 2002 contract pared gains after moved to a high of 14,145 yuan/mt, closing 0.64% higher on the day at 14,105 yuan/mt. Prices were supported as social inventories of primary aluminium did not build up as expected over the weekend, as unfavourable weather in Inner Mongolia disrupted the shipment to warehouses. Macroeconomic turmoil may keep speculative investors cautious in the near term. 

Zinc: Unexpected decline in social inventories of refined zinc boosted morale in longs and lifted the most-traded SHFE 2003 contract, which breached pressure from the 40-day moving average to a high of 18,140 yuan/mt. It ended up 2.23% at 18,110 yuan/mt, putting a halt to a three-consecutive-day losing streak. Open interest added 4,725 lots to 88,508 lots as investors loaded up their bullish position. Further upward momentum will likely see the contract testing pressure from the Bollinger upper band tonight. 

Nickel: The most-traded SHFE 2003 contract trimmed part of the decline from last Friday and hovered around the daily moving average, or 108,000 yuan/mt, before closed down 1.8% at 108,190 yuan/mt. It may stay rangebound at 108,000 yuan/mt tonight. 

Lead: The most-traded SHFE 2002 contract followed zinc contracts higher, as it recovered and moved above the daily moving average to regain losses from last Friday, ending at 14,755 yuan/mt, still 0.14% lower on the day. Short-covering accounted for the rebound in prices. Nonetheless, pressure above from several moving averages and weakness in LME lead may keep the contract at low levels tonight. 

Tin: The most-liquid SHFE 2005 contract climbed as investors cut their short position, but it failed to end higher on the day with pressure from the five-day moving average. Closing 0.22% lower at 135,770 yuan/mt, the contract is expected to find support from 135,000 yuan/mt tonight.