SHANGHAI, Jul 9 (SMM) – Ferrous and nonferrous metals rallied on Monday July 9 as China’s foreign exchange reserves rebounded in June, and as the US-China trade conflict slightly receded from the spotlight.
SHFE nonferrous metals closed with a mixed performance, with lead and nickel lower. Copper performed strongly and jumped 1.46%. Zinc rose over 1%, and tin and aluminium inched up nearly 1%.
The ferrous complex closed higher across the board. Rebar, hot-rolled coil and coke rose over 1%, coking coal and iron ore edged up close to 1%.
Copper: In the morning, the SHFE 1809 contract traded at 49,700-49,900 yuan/mt. It climbed to a high of 50,080 yuan/mt in the afternoon with buoyance from longs as market sentiment over the trade war improved. Open interests rose 6,834 lots to 182,000 lots. The increase of $1.5 billion in China’s foreign exchange reserve eased the pressure of the yua's depreviation. We expect the contract to retain its robust trend and test support at 50,000 yuan/mt tonight. Investors would take guidance from the movement of LME copper tonight.
Aluminium: The SHFE 1809 contract traded rangebound within a narrow range after hitting a high of 14,225 yuan/mt during the day. Open interests of all SHFE aluminium contracts were up 8,776 lots to 638,874 lots. Aluminium prices are likely to stabilise in the near term as alumina prices rebounded. Whether aluminium prices can rebound, however, remains to be seen given the elevation in trade tensions and strong pressure on the fundamentals front. Demand enters into low season while new capacity is gradually commissioned despite the slow pace. The 1809 contract is expected to hover at 13,950-14,200 yuan/mt in the short term.
Zinc: The SHFE 1809 contract initially extended its overnight gains to 22,275 yuan/mt this morning but fell after it met resistance. This suggested limited upward momentum for the contract. As shorts entered the market, the contract deepened its losses to 21,965 yuan/mt in the afternoon. It recovered some losses before closing. Expectations of an open import arbitrage window grew as the yuan gained. The SHFE 1809 contract is likely to be weak tonight as its LME counterpart further weakened during European trading hours.
Nickel: The SHFE 1809 contract hovered around 111,850 yuan/mt during the day afteit fell to the 111,500 yuan/mt level from a high of 112,210 yuan/mt. Support was seen at the 60-day moving average. Its KDJ lines converged and the MACD green line changed little. The contract is likely to trade rangebound around the 111,500 yuan/mt level tonight.
Lead: The SHFE 1808 contract came off from highs and hovered around the daily moving average in the morning. With weak sentiment, the contract fell again to the daily moving average after it climbed up in the afternoon. It found support at the 19,500 yuan/mt level during the day as its three Bollinger bands flattened. We expect the contract to consolidate inthe near term and to test the pressure at the 40-day moving average tonight.
Tin: As shorts exited during the day, the SHFE 1809 contract climbed up during the day. It surged to a high of 144,450 yuan/mt, with pressure at the 10-day moving average. Further upward room is seen in the short term, and resistance will be at 145,000 yuan/mt.