LIVE FUTURES REPORT 01/08: SHFE base metals prices mixed; copper supported

Base metals prices on the Shanghai Futures Exchange were split into two camps at the end of morning trading on Wednesday August 1, with nickel, zinc and copper edging higher, while the rest weakened.

The base metals markets remained choppy ahead of major data releases later today, which include the US Federal Reserve’s rate decision and statement.

The dollar has firmed in the run up to the release the US central bank’s statement; the dollar index was recently at 94.62 on Wednesday, compared with a reading of 94.39 on Tuesday morning.

The firmer US currency has exerted some downward pressure on the base metals complex this morning but the main driver behind this morning’s weaker performance is a revival in trade war rhetoric by the United States.

The US plans to propose a 25% tariff on $200 billion worth of Chinese imports, much higher than the initial 10% tariff it had previously indicated, according to various media reports.

The imports include food products, chemicals, steel and aluminium and consumer goods.

While the tariffs would not be imposed until after a period of public comment, the move to increase the proposed level to 25% has sparked fears of an escalation in the trade dispute between the world’s two biggest economies.

The renewed trade concerns brought a bout of risk-off trading into the market which is keeping base metals prices under pressure.

Dampening sentiment further in the base metals markets was the disappointing release of China’s Caixin manufacturing purchasing manager’s index (PMI) earlier. The Caixin PMI for July came in at 50.8, against an expected reading of 50.9.

Copper prices managed to record marginal gains this morning, however, with the red metal continuing to benefit from possible supply disruptions as a result of ongoing labor negotiations in Chile, but investors seem in no hurry to chase prices higher amid all the uncertainty surrounding global trade.

The most-traded September copper contract on the SHFE traded at 49,900 yuan ($7,315) per tonne as at 13.28pm Shanghai time, inching up 70 yuan per tonne or 0.1% from Tuesday’s close.

Union workers at Chile’s Escondida copper mine, the world’s largest, are likely to vote unanimously to strike when ballots are counted on August 1, union officials told Metal Bulletin.

The mine is forecast to produce 1.2 million tonnes of copper this year.

If a strike is called, BHP will have the option to request a five-day mediation period from the Chilean Ministry of Labor. If it declines to do so, workers would strike immediately.

Base metals prices

  • The SHFE September aluminium contract dipped 40 yuan per tonne to 14,500 yuan per tonne.
  • The SHFE September zinc contract rose 70 yuan per tonne to 21,475 yuan per tonne.
  • The SHFE September lead contract dived 110 yuan per tonne to 18,380 yuan per tonne.
  • The SHFE September tin contract plunged 900 yuan per tonne to 147,200 yuan per tonne.
  • The SHFE September nickel contract soared 510 yuan per tonne to 113,520 yuan per tonne.

Currency moves and data releases

  • The dollar index inched up 0.06% to 94.62 as at 13.28pm Shanghai time.
  • In other commodities, the Brent crude oil spot price was down 0.25% to $73.98 per barrel as of 13.28 pm Shanghai.
  • In equities, the Shanghai Composite tumbled 0.5% to 2,862.12 as of 13.33pm Shanghai time.
  • In US data on Tuesday, the core PCE price index for June came in as expected at 0.1%, while the employment cost index for the same period dropped to 0.6%, from 0.8% previously.
  • Meanwhile, both personal spending and personal income for June were in line with expectations at 0.4%.
  • It is another data-heavy day on Wednesday, with data already out showing China’s Caixin manufacturing PMI undershot slightly in July with a reading of 50.8, compared with an expected print of 50.9.
  • Later, there is a host of manufacturing PMI data out across Europe and the United States.
  • Other US data of note out on Wednesday includes construction spending, ISM manufacturing prices, crude oil inventories and total vehicle sales.
  • In addition, the US Federal Open Market Committee rate decision and statement is due.