LIVE FUTURES REPORT 03/05: Strong dollar drags most SHFE base metals prices down; aluminium bucks trend

Base metal prices on the Shanghai Futures Exchange were broadly down during Asian morning trading on Thursday May 3 amid continued strength in the dollar, with only aluminium bucking the general weakness.

The most-traded SHFE June copper contract was at 50,910 yuan ($7,998) per tonne as at 11.14 am Shanghai time, down by 280 yuan per tonne from the previous day’s closing price. Close to 109,000 lots of the contract have been traded so far.

The dollar index hit as high as 92.84 on Wednesday – the highest since December 27, 2017 – after the market digested the US Federal Open Market Committee’s (FOMC) post-monetary policy meeting statement. As widely expected, the Federal Reserve left its benchmark rate range unchanged at 1.5-1.75%.

“The key take away is that in spite of the recent inflation uplift the Fed is happy to stay the course and doesn’t yet see the need to accelerate the pace of rate hikes,” National Australia Bank said on Thursday.

The post-meeting statement revealed a Fed more confident that inflation will recover, which sees a continued strengthening of the labor market, with economic activity remaining at a ‘moderate rate’, the bank said.

“The Fed remains on course to at least deliver two more rate hikes this year – a June hike is almost fully priced and another one also essentially fully priced for December – with the risk of adding one more if there is evidence of more inflationary pressures,” the bank added.

SHFE aluminium prices followed overnight gains on the London Metal Exchange whereby the LME three-month aluminium price closed a 2.6% higher on Wednesday, with LME warrant cancellations providing support – more than 50,000 tonnes of fresh cancellations have taken place across Asia this week.

Global aluminium prices continued to remain volatile amid US sanction- and trade policy-related developments.

On Tuesday, the US Treasury gave investors an additional month to divest or transfer their holdings in sanctioned Russian companies including aluminium producer UC Rusal. The US has also postponed imposing Section 232 tariffs on aluminium and steel imported from the European Union, Canada and Mexico until June 1, from the initial deadline of May 1.

Trade will remain in focus with senior US officials arriving in Beijing to start trade negotiations with their Chinese counterparts on Thursday and Friday.

The US had threatened to impose import tariffs of 25% on a list of 1,300 items produced by China – among them aluminium and aluminium products, while China has threatened a 25% import tax on $50 billion worth of US-origin products including soy beans, automotives, chemicals and airplanes.

Rest of the complex down, except aluminium

  • The SHFE June aluminium price rose 90 yuan per tonne to 14,520 yuan per tonne.
  • The SHFE June zinc price decreased 210 yuan per tonne to 23,690 yuan per tonne.
  • The SHFE June lead price slipped 130 yuan per tonne to 18,460 yuan per tonne.
  • The SHFE September tin price dipped 340 yuan per tonne to 147,060 yuan per tonne.
  • The SHFE July nickel price eased 670 yuan per tonne to 104,430 yuan per tonne.

Currency moves and data releases

  • The dollar index consolidated on Thursday, falling 0.2% to 92.53 as at 11.12 am Shanghai time after hitting as high as 92.84 on Wednesday, the highest since December 27, 2017.
  • In other commodities, the Brent crude oil spot price increased by 0.2% to $73.20 per barrel as at 11.13 am Shanghai time.
  • In equities, the Shanghai Composite fell 0.6% to 3.062.77 as at 11.12 am Shanghai time on Thursday.
  • In US data on Wednesday, the ADP non-farm employment change – a precursor to the official jobs report on Friday – was slightly above expectations at 204,000 in April, while weekly crude oil inventories rose 6.2 million barrels, significantly higher than the 1-million-barrel increase forecast.
  • A string of US data is due later today, including preliminary non-farm productivity, preliminary unit labor costs, unemployment claims, trade balance, financial services purchasing managers’ index (PMI), ISM non-manufacturing PMI and factory orders.

SHFE snapshot at 11.14 am Shanghai time
Most-traded SHFE contracts
  Price (yuan per tonne) Change since previous session’s close (yuan)
Copper (Jun) 50,910 -280
Aluminium (Jun) 14,520 90
Zinc (Jun) 23,690 -210
Lead (Jun) 18,460 -130
Tin  (Sep) 147,060 -340
Nickel  (Jul) 104,430 -670

LME snapshot at 04.15 am London time
Latest three-month LME Prices
  Price ($ per tonne) Change since previous session’s close ($)
Copper 6,807 -13
Aluminium 2,310.50 -11
Lead 2,280.50 10.5
Zinc 3,082 35
Tin 21,040 -40
Nickel 13,910 -70
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