LIVE FUTURES REPORT 02/08: Most SHFE base metals prices down on renewed US-China trade tensions

Base metals prices on the Shanghai Futures Exchange were under pressure during morning trading on Thursday August 2, following a ratcheting up of trade tensions between the United States and China on Wednesday.

News that US President Donald Trump’s administration pledged to raise the proposed tariffs on $200 billion worth of Chinese goods to 25% from an initial 10% has reignited fears of an escalating trade war between the world’s two largest economies.

China’s Ministry of Foreign Affairs has said it will fight back should the US further increase tariffs, sending a fresh wave of nervousness through commodity markets this morning.

Moreover, the base metals complex was also hit by reports that Chinese authorities would continue to clamp down on house prices, according to ANZ Research.

Home owners in the southern Chinese city of Shenzhen will have to hold a property for at least three years before being allowed to sell, according to a statement on the city government’s website earlier this week. The city has also suspended home purchases by corporations and organizations.

Base metals prices on the SHFE fell in response, with heavy losses in nickel (-3.2%) and copper (-1.5%) dragging the rest of the complex lower. Tin bucked the trend, however, to log a marginal gain of 0.3%.

The most-traded September copper contract on the SHFE traded at 49,090 yuan ($7,203) per tonne as at 11.22am Shanghai time, plunging 730 yuan per tonne or 1.5% from Wednesday’s close.

The weakness in the red metal comes despite continued concerns about possible supply disruptions in Chile.

A strike at the world’s largest copper mine, Escondida, is likely to get underway later on Thursday, while a strike at Codelco’s 300,000-tonne-per-year copper mine, Chuquicamata, was instigated in the early hours of Monday.

All other metals down, except tin

  • The SHFE September nickel contract fell 3,570 yuan per tonne to 109,720 yuan per tonne.
  • The SHFE September aluminium contract dipped 65 yuan per tonne to 14,365 yuan per tonne.
  • The SHFE October zinc contract slid 190 yuan per tonne to 21,105 yuan per tonne.
  • The SHFE September lead contract dropped 40 yuan per tonne to 18,265 yuan per tonne.
  • The SHFE September tin contract rose 410 yuan per tonne to 147,500 yuan per tonne.

Currency moves and data releases

  • The dollar index inched up 0.06% to 94.71 as at 11.22am Shanghai time.
  • In other commodities, the Brent crude oil spot price was up 0.1% to $72.64 per barrel as of 11.22 am Shanghai.
  • In equities, the Shanghai Composite tumbled 2.45% to 2,755.22 as at 12.08pm Shanghai time.
  • In another data-heavy day on Wednesday, China’s Caixin manufacturing purchasing managers’ index (PMI) undershot slightly in July at 50.8, compared with an expected print of 50.9.
  • In the US, the ADP non-farm employment change showed 219,000 Americans joined the labor market, above the forecast of 186,000.
  • The ISM manufacturing PMI slowed to 58.1 in July, significantly lower than an expected print of 59.4, while construction spending fell 1.1% in June – the biggest drop in more than a year.
  • US total vehicle sales came in at 16.8 million in July, falling short of the forecast 17.1 million.
  • In data today, there is the UK’s construction PMI, a Bank of England inflation report and a Monetary Policy Committee bank rate vote and statement.
  • In US data today, we have Challenger job cuts, unemployment claims and factory orders.