LIVE FUTURES REPORT 02/01: Disappointing Chinese data sinks most SHFE base metals; lead, nickel prices little changed

In Chinese data released earlier on Wednesday, the country’s Caixin manufacturing purchasing managers’ index (PMI) for December fell to 49.4, from 50.2 in November. The latest reading showed factory activity contracted for the first time in 19 months amid a continuing trade dispute with the United States. A reading above 50 indicates expansion, while below that signals contraction.

This weaker-than-expected data follows a similarly disappointing release on Monday, which saw China’s official manufacturing PMI fall to 49.4 in December, according to the country’s National Bureau of Statistics. This was below November’s reading of 50 and marked the weakest reading since February 2016.

The data reignited concerns over reduced metal demand due to slowing growth in China, which in turn weighed on prices for the base metals this morning.

The most-traded February copper contract on the SHFE fell to 48,040 yuan ($6,985) per tonne as at 9.33am Shanghai time, down by 0.6% or 300 yuan per tonne from last Friday’s close. The exchange was closed on Monday and Tuesday due to national holidays in China.

“The global economy remains weak, with downward pressure on China’s economy weighing on financial markets and metals demand. At the same time, both sides of coppers’ supply chain have adopted a wait-and-see stance which has led to thin market activity and temporary pressure on copper prices,” Guotai Junan Futures said on Wednesday.

Zinc was down the most, however, with the metal also contending with a backdrop of rising availability. The most-traded February zinc contract price on the SHFE fell 0.7% or 155 yuan per tonne to 20,770 yuan per tonne as at 09.33am Shanghai time.

Total mined zinc output rose by 112,000 tonnes in the first nine months of 2018 compared with a year earlier, according to the International Lead and Zinc Study Group (ILZSG). The study group now expects global mine output to grow by 2% to 13.03 million tonnes in 2018 and a further 6.4% to 13.87 million tonnes in 2019.

“Growing global mine output and rising TCs could translate into higher global refined output… So we expect [zinc prices] to continue to consolidate near recent lows in the very short term because [zinc’s] fundamental backdrop in 2019 does not look as bullish as that of 2018,” Fastmarkets analyst Andy Farida said.

The rest of the complex were either little changed with a slight upward bias, as was the case in nickel and lead, or slightly weaker in the case of aluminium and tin.

Base metals prices

• The SHFE February aluminium contract fell by 80 yuan per tonne to 13,510 yuan per tonne.
• The SHFE February lead contract slightly edged up by 15 yuan per tonne to 18,065 yuan per tonne.
• The SHFE May tin contract slid by 280 yuan per tonne to 143,170 yuan per tonne.
• The SHFE May nickel contract gained 20 yuan per tonne to 88,090 yuan per tonne.

Currency moves and data releases

• The dollar index gained 0.11% to 96.16 as of 09.34am Shanghai time.
• In equities, the Shanghai Composite was down 1.16% to 2,465.22 at 11.12am Shanghai time.
• In data already out on Wednesday, China’s Caixin manufacturing PMI for December stood at 49.7, down from 50.2 previously and missing an expected reading of 50.1.
• Later, we have a host of manufacturing PMI data out across Europe and the US.