LIVE FUTURES REPORT 06/09: SHFE base metals prices broadly up; tin, lead buck the trend

Zinc was the outperformer of the SHFE complex this morning, with the metal benefitting from a backdrop of tightening availability, reflected in lower stock levels and reduced domestic mine production in China.

Zinc’s most-traded October contract on the SHFE stood at 21,080 yuan ($3,084) per tonne as at 10.14am Shanghai time, up by 365 yuan per tonne or 1.8% from Wednesday’s close.

“In China, [zinc] availability remains tight after domestic mine production dropped 8.6% in the first half of 2018 due to closures following strict environmental inspections. Chinese smelters have cut production as a result; production totaled 439,000 tonnes in July, down 3.5% year on year, according to the latest data from China’s National Bureau of Statistics,” Metal Bulletin analyst Andy Farida said.

As a result, consumers are turning to exchange inventories for their needs, Farida added.

Deliverable zinc stocks at SHFE warehouses totaled 29,936 tonnes on August 31, the lowest since October 2007. Stocks are down 86% from the beginning of the year, when stocks totaled 207,163 tonnes on August 8.

“Zinc inventories are really low right now, which is supporting the price firmly. Smelters were not willing to expand their production unless the price of zinc went up to 22,000 yuan per tonne. This has exacerbated the situation of low stocks,” an analyst with Guotai Junan Futures told Metal Bulletin.

Copper also recorded relatively strong gains, finding support from news that Zijin Mining Group had acquired copper miner Nevsun Resources, which the market took to mean that China’s appetite for the red metal remains strong, according to ANZ Research.

Low exchange inventories are also providing those in the copper market with some positivity this morning; SHFE copper stocks totaled 138,001 tonnes on August 31, which is down 55% or 169,434 tonnes from the 307,435 tonnes recorded on March 23.

In response, the most-traded October copper contract on the SHFE rose 220 yuan per tonne to 47,730 yuan per tonne compared with Wednesday’s close.

Providing further support to the complex as whole was the continued retreat in the dollar index; the index dipped 0.11% to 95.0 as at 10.14am Shanghai time, this compares with a reading of 95.34 at roughly the same time on Wednesday.

Lead and tin bucked the general show of strength in early session on Thursday with both metals correcting downward following recent price gains this week.

Base metal prices

• The SHFE October copper contract moved up 220 yuan per tonne to 47,730 yuan per tonne.
• The SHFE November aluminium contract soared 45 yuan per tonne to 14,715 yuan per tonne.
• The SHFE October zinc contract was up 365 yuan per tonne to 21,080 yuan per tonne.
• The SHFE November nickel contract increased 640 yuan per tonne to 102,970 yuan per tonne.
• The SHFE October lead contract slipped 130 yuan per tonne to 18,535 yuan per tonne.
• The SHFE January tin contract dropped 1,180 yuan per tonne to 144,230 yuan per tonne.

Currency moves and data releases

• The dollar index was slightly down by 0.11% at 95.0 as at 10.13am Shanghai time.
• In other commodities, Brent crude oil was up 0.07 % at $77.07 per barrel as at 10.13am Shanghai time.
• In equities, the Shanghai Composite increased 0.17 % to 2,708.85 as at 11.55 am Shanghai time.
• In European data on Wednesday, the Spanish services purchasing managers’ index (PMI) for August beat expectations with a print of 52.7, which was also higher than the previous month’s figure of 52.6. In contrast, the Italian services PMI for the same period missed forecasts with a reading of 52.6, down from 54 in July.
• France’s final services PMI came in at 55.4, falling short of both the forecast and previous reading of 55.7, while the German final services PMI stood at 55, missing both an expected and previous print of 55.2.
• The European Union’s final services PMI for August was flat at 54.4, while the United Kingdom’s PMI edged up higher to 54.3, from 53.5 in the prior month.
• In US data on Wednesday, the country’s trade deficit widened to $50.1 billion in July, from $45.7 billion in June.
• The economic agenda is busy today with a host of US releases, the highlights of which include the revised non-farm employment change, final services PMI, ISM non-manufacturing PMI, factory orders and crude oil inventories.