LIVE FUTURES REPORT 06/09: Broad-based strength in SHFE base metals prices continues; Cu up 1.2%

With the exception of tin and nickel, base metals prices on the Shanghai Futures Exchange were up during morning trading on Friday September 6.

Exhibiting similar moves to Thursday morning, nickel and tin continued to pull back following recent strength, while the rest of the complex gained on easing geopolitical tensions and positive US data – see other highlights below.

“Feel good vibes have continued… boosted by [Thursday’s] confirmation by China that high-level trade talks with the US will resume in October,” David de Garis, director and senior economist at National Australia Bank, said.

Copper led the charge higher with the metal’s most-traded November contract climbing to 47,540 yuan ($6,653) per tonne as at 10.20am Shanghai time, up by 550 yuan per tonne - or 1.2% - from Thursday’s closing price of 46,990 yuan per tonne.

This was followed by gains in October lead (+0.8%), October aluminium (+0.4%) and October zinc (+0.2%). September tin, at 141,400 yuan per tonne, was down by about 440 yuan per tonne - or 0.3% - from its close on Thursday, while November nickel plunged by 1,560 yuan per tonne - or 1.1% - to give the worst performance of the complex.

Copper’s outperformance on the SHFE mirrors the strength exhibited by the London Metal Exchange’s three-month copper price on Thursday, when it breached the $5,800-per-tonne resistance level and closed at its highest level since August 1.

Declining stock levels and expectations of an uptick in demand are supporting red metal prices.

Deliverable copper stocks at SHFE warehouses totaled 143,876 tonnes on August 30, down by 12,697 tonnes week on week.

“In the physical market, a three-year low in Shanghai-bonded stocks boosted the in-warehouse Shanghai copper cathode premium in the week to Tuesday, while in Europe, sources reported an uptick in spot trading of copper cathodes amid ample supply,” Fastmarkets analyst James Moore said.

“Factors such as urbanization, decarbonization and the use of electric vehicles will continue to support copper consumption across the medium-to-longer term,” Moore concluded.

The latest figures showed new energy vehicle sales totaled 619,000 vehicles in January-July, up by 51% year on year.

“In addition, investment in China’s copper intensive electricity grid is expected to intensify in the second half of 2019,” Moore said, adding that China’s State Grid Corp’s spending has dropped by 19% year on year across the first half of 2019, compared with projections that investment in the nation’s electricity grid would increase by 5% this year.

Other highlights

  • The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was at 98.43 as of 10.20am Shanghai time on Friday, up by 0.02% from Thursday’s closing price of 98.41.
  • The Shanghai Composite Index grew by 0.16% to 2,990.01 as at 10.49am Shanghai time.
  • Data released on Thursday showed that German factory orders had slumped by a seasonally adjusted 2.7% in July, below estimates of a 1.5% fall and a reversal from the previous month’s growth of 2.7%.
  • In the United States, the ADP non-farm employment change showed that private sector employment rose by 195,000 in August, higher than the expected increase of 148,000, while revised non-farm productivity and revised unit labor costs both exceeded expectations, at 2.3% and 2.6% respectively.
  • Unemployment claims in the US were at 217,000, higher than forecast and the previous month’s reading, the final services purchasing managers’ index (PMI) was lower than expected at 50.7, the Institute for Supply Management non-manufacturing PMI beat estimates at 56.4, factory orders were up at 1.4% and crude oil inventories had fallen 4.8 million barrels.
  • On Friday, German industrial production, the European Union’s revised gross domestic product and the monthly US jobs report are of note.
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