SHANGHAI, Jun 25 (SMM) – Nonferrous metals futures saw mixed trading on Monday June 25 as the decision of China’s central bank to cut the required reserve ratio (RRR) by 0.5 percentage point provided only limited support. SHFE lead gained over 1.1%, nickel rose 0.72%, while zinc slumped over 1.8%. Other base metals inched down.
In the ferrous market, iron ore jumped nearly 2%, coking coal increased almost 1.4%, while coke lost 1.8%. Rebar declined 1.1%, and hot-rolled coil went down slightly.
Copper: The SHFE 1808 contract halted its upward trend at a high of 52,130 yuan/mt with pressure from the 40-day moving average. It mostly hovered around the daily moving average at 51,877 yuan/mt in the afternoon but slumped to close at a low of 51,680 yuan/mt as the US dollar gained. Copper prices received limited momentum from China’s RRR cut. The contract is expected to remain its rangebound trend tonight. Investors would look for more cues from the US new home sales for May.
Aluminium: SHFE aluminium fell for the most part during the day as consumption weakens and inventory draw slows. On the cost front, we see possibility of full costs hitting 13,800 yuan/mt as falling alumina and prebaked anode prices have yet to see signs of stability. We expect aluminium prices to remain weak in the short term as bearish factors dominate the market.
Zinc: With pressure from shorts, the SHFE 1808 contract dived to 22,700 yuan/mt and received only temporary support. It dipped further near closing as investors added their short bets, hitting a low this year at 22,540 yuan/mt. Open interests for both 1808 and 1809 contracts rose by over 10,000 lots with capital inflow from short positions. However, as domestic zinc inventory declined and LME zinc rebounded after London came in, the SHFE 1808 contract is expected to see eased pressure from shorts with support at 22,500 yuan/mt tonight.
Nickel: The nickel market was upbeat given the shrinking inventory in Chinese and LME warehouses, limited nickel pig iron (NPI) production on China's intensive environmental protection initiatives and growing stainless steel production on recovered profits. As longs took profits and left, the SHFE 1809 contract fell in the morning after hitting a high of 118,440 yuan/mt initially. The contract hovered around the 116,725 yuan/mt level in the afternoon after extending its decline as shorts added their positions. Its KDJ lines diverged and expanded upwards while the MACD green line shortened. We expect it to trade rangebound at highs tonight.
Lead: SHFE lead saw its main contract move from 1807 to 1808 today. The latter jumped to a high of 19,795 yuan/mt after opening with buoyance from longs, but tumbled in the afternoon as most base metals weekend. It closed at 19,550 yuan/mt, up 155 yuan/mt from last Friday. With trading volume rising 16,060 lots to 50,370 lots during the day, the contract is likely to cease dipping in the short run. We expect it consolidate between the five-day moving average and the 19,500 yuan/mt level tonight.
Tin: The SHFE 1809 contract fell during the day as longs continued to cut their positions. We expect it to remain under pressure in the short term with support at the 143,000 yuan/mt level.