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Zinc led the decline with its most-traded August contract on the SHFE sliding to 21,975 yuan ($3,313) per tonne as at 10.13am Shanghai time, down by 395 yuan per tonne or 1.8% from Wednesday’s close. Open interest for the contract dropped 8,320 positions to 167,082 positions on Thursday morning, compared with the previous day’s close.
Growing concerns of an uptick in US-China trade tensions continue to overshadow the market, denting sentiment for the base metals. Market participants will are likely to remain cautious in the run up to Friday, when China and the United States are set to implement reciprocal trade tariffs.
“Investors remained nervous, with China and the US preparing to initiate tariffs on a variety of goods later this week,” ANZ Research said. “With investors turning increasingly bearish, the momentum will be difficult to stop with the economic data also remaining soft.”
Last week, China’s official manufacturing purchasing managers’ index (PMI), a key indicator for the country’s economic growth, fell short of market expectations with a print of 51.5 in June – 51.9 had been called for. A reading above 50 indicates expansions, while below contraction.
The bearish sentiment has seen market participants taking up more short positions and liquidating long positions, further pressuring base metals prices.
In supply news, concerns over possible large in-flows of zinc from bonded warehouses offset domestic supply constraints resulting from the environmental crackdown seen across China in June.
Zinc stocks in the Shanghai-bonded zone remain high, with Metal Bulletin assessing inventories at 156,000-161,000 tonnes on Monday, up 38% or 44,000 tonnes from a year ago.
In copper, persistent worries over a weakened yuan against the dollar continued to stifle investors’ appetite for the red metal in China with SHFE prices falling below the 50,000-yuan-per-tonne level during the evening trading session on Wednesday.
According to exchange rate website Oanda.com, $1 was worth 6.63 yuan on Thursday, compared with 6.47 yuan two weeks ago.
Other base metals move lower; aluminium finds support
Currency moves and data releases