LIVE FUTURES REPORT 01/12: SHFE copper prices pressured lower by disappointing China data

The most-traded January copper contract on the SHFE stood at 52,730 yuan ($7,975) per tonne as of 10.35am Shanghai time, down by 110 yuan from the previous session’s close.

In data today, China’s November Caixin manufacturing purchasing managers’ index (PMI) disappointed with a print of 50.8 versus an expected reading of 51.2. A reading above 50 indicates expansion, while a reading below that signals contraction.

The weaker-than-expected reading has fueled concerns regarding China’s economic outlook and pressured copper prices this morning, despite the country’s manufacturing and non-manufacturing PMI readings beating expectations on Thursday.

In supply-side news, Chile’s copper production grew 13.3% in October from a year earlier, helped by increased ore processing rates.

This uptick in production is offsetting any support seen from reports of ongoing and potential industrial action in Latin America.

An indefinite strike over pay and benefits at Southern Peru Copper Corp entered its tenth day on November 30 with no resolution in sight.

Meanwhile, there was news of looming industrial action in Chile this week.

A trade union that represents 24% of Teck’s Quebrada Blanca workforce have rejected the company’s contract offer and could go on strike if no agreement is reached after expected government-mediated talks take place.

Copper stocks on the London Metal Exchange declined a net 3,200 tonnes to 188,525 tonnes on Thursday. LME red metal stocks have now fallen 7.7% since Monday.

Aluminium prices subdued by disappointing winter curbs

• The SHFE January aluminium contract price dipped 10 yuan to 14,555 yuan per tonne.
• This follows a sudden rebound on Thursday afternoon when word spread in the market that a top official in China’s Shandong province had ordered Shandong Weiqiao to cut 30% of its legal aluminium capacity and suspend all illegal aluminium capacity. However, the boost was short-lived and aluminium prices have traded sideways since this morning’s open.
• In general, light metal prices continue to be subdued by the disappointing execution of planned winter production cuts in China and falling alumina prices.
• “Aluminium was also lower, as reports suggested the cuts to production have been less than expected. It is believed that China Hongqiao has been exempt from winter curbs, although the company has yet to confirm this,” ANZ Research said.
• Due to the sluggish demand from local smelters, the Chinese alumina price fell to 3,350-3,450 yuan per tonne on Thursday, down 2.2% from previously, according to Metal Bulletin’s latest assessment.

Zinc, lead prices buoyed; others lower

• The SHFE May nickel contract price dropped 770 yuan to 90,300 yuan per tonne.
• The SHFE January lead contract price rose 230 yuan to 18,605 yuan per tonne
• The SHFE January zinc contract price gained 60 yuan to 25,020 yuan per tonne.
• The SHFE January tin contract price fell 750 yuan to 140,840 yuan per tonne.

Currency moves and data releases

• The dollar index was down by 0.08% at 92.96 as of 10.36am Shanghai time.
• In other commodities, the Brent crude oil spot price rose by 0.46% to $62.93 per barrel while the Texas light sweet crude oil spot price gained by 0.38% to $57.57.
• In equities, the Shanghai Composite was down 0.21% to 3,310.06.
• In data on Thursday, releases from Europe broadly disappointed: the Eurozone’s November consumer price index (CPI) flash came in at 1.5% versus an expected 1.6%, while the core reading missed at 0.9% – 1.0% had been called for. However, the EU’s unemployment rate for October beat expectations with a reading of 8.8%, against both a previous and expected reading of 8.9%.
• US data on Thursday was broadly positive with monthly personal spending and income exceeding expectations with prints of 0.3% and 0.4% respectively. The Chicago PMI surprised to the upside with a reading of 63.9, versus an expected print of 62.2. The core PCE price index was in line with expectations at 0.2%.
• Data out already today showed China’s Caixin manufacturing PMI surprising to the downside with a print of 50.8 versus an expected 51.2.
• Later we have a host of manufacturing PMI data out across Europe, the United Kingdom and the United States. Other US data expected later today includes monthly construction spending, ISM manufacturing prices and total vehicle sales.
• In addition, US Federal Open Market Committee members Robert Kaplan and Patrick Harker are speaking.