SHANGHAI, Jul 2 (SMM) – Both nonferrous and ferrous futures fell on Monday July 2, except for SHFE tin, as China’s manufacturing activity slipped in June and as a wave of tariffs are on the horizon.
A loss of 1.7% in SHFE lead led the declines in the nonferrous complex. Aluminium dropped 1.2%, nickel edged down close to 1%, zinc and copper closed slightly lower as they recovered some losses before close.
Coke led the decreases in the ferrous complex with a drop of 2.5%. Coking coal and iron ore slid close to 2%. Hot-rolled coil fell 1.2% and rebar lost 0.9%.
Copper: The SHFE 1808 contract slumped to a low of 50,950 yuan/mt in the afternoon as shorts dominated the market. This followed it hovering above the daily moving average and touching a high of 51,510 yuan/mt during the morning. The contract closed at 51,210 yuan/mt, down 220 yuan/mt from last Friday. It will continue to test support at 51,000 yuan/mt tonight with pressure from shorts. Investors would look for more cues from the US Markit manufacturing purchasing managers’ index (PMI) in June during the night session.
Aluminium: The SHFE 1808 contract fell below the 14,000 yuan/mt level during the day. It is likely to continue to trade rangebound at lows on weakening consumption and gradually falling costs. The contract is expect to struggle at the 14,000 yuan/mt level tonight.
Zinc: Suppressed by its LME counterpart, the SHFE 1808 contract saw weak performance during the day with a bearish MACD divergence. We believe it is difficult for the import arbitrage window to open soon as yuan depreciated further. The shrinking inventory across Shanghai, Guangdong and Tianjin may give some support to zinc prices. The contract is likely to try to stay at the 23,000 yuan/mt level today with support at the five-day moving average.
Nickel: The SHFE 1809 contract traded at 116,400-117,200 yuan/mt in the morning, but was dragged down by a plummeting rebar price to a low of 115,000 yuan/mt in the afternoon. Open interests declined 25,800 lots to 391,000 lots during the day, with capital outflow of 372 million yuan, topping the base metals contracts. The contract is expected to test support at 115,000 yuan/mt tonight and to stay at the level in the short term. While nickel pig iron output affected by the environmental review has yet to recover, the commissioning of the phase III stainless steel project at Indonesia Tsingshan will provide some support.
Lead: The SHFE 1808 contract fell sharply during the day and its five-day moving average slowed down the upward trend. Its trading volumes shrank for two consecutive trading days. Given the bearish MACD crossover, the contract is likely to extend its decline tonight and test support at the 20,000 yuan/mt level.
Tin: As longs cut their positions, the SHFE 1809 contract came off after hitting a high of 146,020 yuan/mt during the day. It is likely to trade rangebound in the short term with resistance at the 146,000 yuan/mt level.