LIVE FUTURES REPORT 03/08: Most SHFE base metals drift lower on trade tensions, stronger dollar; ali, zinc prices up

Weakness was the dominant theme across the SHFE base metals complex this morning with only aluminium and zinc managing to secure any gains, albeit marginal ones.

“The volumes so far in today’s Asian session are so small they could almost be described as nonexistent and it feels like traders are just glad it is the end of the week, which has once again been destabilized by ongoing fears of a USA-China trade war fueled by President Trump and his tweets,” Kingdom Futures director and chief executive officer Malcolm Freeman told Metal Bulletin.

A ratcheting up of tensions between China and the United States continues to subdue the base metals this morning.

China has said it is ready to respond to US plans to increase planned tariffs on $200 billion worth of Chinese goods; the Trump administration warned earlier this week that it may raise import tariffs from 10% to 25%.

“Wilbur Ross, the US Secretary of Commerce kept up the pressure on China, saying the US must create a situation where it is more painful for China than the US,” ANZ Research noted on Friday.

Meanwhile, a firmer dollar overnight also sapped investors’ appetite for the base metals.

The dollar index stood at 95.14 as at 11.15am Shanghai time, up from a reading of roughly 94.71 at roughly the same time on Thursday.

As a result, the most-traded September copper contract on the SHFE softened to 49,310 yuan ($7,215) per tonne as at 11.15am Shanghai time, down by 30 yuan per tonne or 0.1% from Thursday’s close.

The weakness in the red metal comes despite news that union workers at the world’s largest copper mine by production, Chile’s Escondida, have voted to reject a new labor contract and go on strike.

Zinc and aluminium prices were supported this morning, however, with the former benefiting from a positive fundamental backdrop.

Cash-strapped zinc smelters in China have been cutting back on refined production, with data from the country’s National Bureau of Statistics showing total output fell 5% year on year to 475,000 tonnes in June.

“This comes at a time when China is running short of refined zinc, with SHFE stocks at 48,135 tonnes [as of July 27], a fresh 2018 low,” Metal Bulletin analyst Andy Farida said.

Base metals prices

• The SHFE September aluminium contract increased 90 yuan per tonne to 14,410 yuan per tonne.
• The SHFE October zinc contract rose 25 yuan per tonne to 21,305 yuan per tonne.
• The SHFE September lead contract fell 210 yuan per tonne to 18,030 yuan per tonne.
• The SHFE September tin contract slipped 1,590 yuan per tonne to 145,560 yuan per tonne.
• The SHFE September nickel contract dropped 730 yuan per tonne to 109,810 yuan per tonne.

Currency moves and data releases

• The dollar index edged down 0.02% to 95.14 as at 11.15am Shanghai time.
• In other commodities, the Brent crude oil spot price was up 0.21% to $73.53 per barrel as at 11.15 am Shanghai.
• In equities, the Shanghai Composite rose 0.13% to 2,771.30 as at 11.28am Shanghai time.
• In US data on Thursday, Challenger job cuts were down 4.2% year over year, while unemployment claims came in at 218,000.
• In data today, China’s Caixin services purchasing managers’ index (PMI) missed with a print of 52.8, compared with an expected read of 53.7.
• Later, there is a host of services PMI data out across Europe and the US.
• Other US data of note on Friday includes the average hourly earnings, non-farm employment change, unemployment rate and the trade balance.