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July 20, 2018

SMM Evening Comments

SHANGHAI, Jul 19 (SMM) – SHFE nonferrous metals closed higher across the board on Thursday July 19 with their early gains down slightly.

Zinc hit the upper limit at one point and finished the day 3.45% higher. Lead increased by 0.85%, copper and nickel inched up, 0.37% and 0.26%, respectively. Tin and aluminium nudged up.

The ferrous complex closed mixed with coking coal up 1.35%. Coke gained 0.67%, rebar inched up 0.58%, iron ore rose 0.32% while hot-rolled coil dipped.

Copper: The SHFE 1809 contract came off after it hit a session-high of 49,150 yuan/mt and then traded rangebound during the day. Over 300 million yuan flowed out of the SHFE copper complex today. Market sentiment was bearish as the US dollar strengthened and as the yuan slipped. LME copper fell through the $6,000/mt level after the European session opened. We expect the SHFE 1809 contract to open lower and lose support at the 48,000 yuan/mt level tonight. Market participants can take some cues from US initial jobless claims.

Aluminium: Longs increased after opening and buoyed the SHFE 1809 contract to a high of 14,145 yuan/mt after opening but the contract met resistance at the 20-day moving average. It declined gradually in the afternoon as the US dollar strengthened, and closed at 14,065 yuan/mt, up 25 yuan/mt from Wednesday. While LME aluminium tumbled as the US dollar gained, the contract was less affected as investors mostly kept on the sidelines. We expect the contract to follow the movement of LME aluminium tonight, and to test support at 14,000 yuan/mt.

Zinc: The SHFE 1809 contract initially extended its overnight gains and rose to the upper limit of 21,645 yuan/mt. As some longs took profits and covered their positions, the contract came off and consolidated around the 21,330 yuan/mt level. Shorts added their positions and longs covered their positions, before the contract deepened its losses and consolidated around 21,115 yuan/mt in the afternoon. We expect the contract to weaken tonight as LME zinc tumbled during European trading hours.

Nickel: After it hit a high of 110,530 yuan/mt in the morning, the SHFE 1809 contract fell and extended its decline in the afternoon. Its KDJ lines diverged and expanded downwards while its MACD green line shortened. We expect it to continue to hover around the 109,500 yuan/mt level tonight. US initial jobless claims last week may give some cues to the market.

Lead: The SHFE 1808 contract lost some of its overnight gains after it initially jumped to 19,240 yuan/mt as SHFE zinc soared. As its LME counterpart plunged during the European trading hours, we expect the SHFE 1808 contract to be dragged down and test the support at the 18,800 yuan/mt level tonight.

Tin: As longs cut their positions, the SHFE 1809 contract fell after it initially extended its overnight gains to a high of 145,490 yuan/mt. Pressure remains above as US-China trade disputes continue to dampen market sentiment. We expect the SHFE 1809 contract to be subdued tonight with support at the 142,500 yuan/mt level.

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