LIVE FUTURES REPORT 06/12: SHFE base metals prices broadly lower amid lingering trade uncertainty

Base metals prices, bar those for zinc, on the Shanghai Futures Exchange were broadly lower during Asian morning trading on Thursday December 6, with lingering concerns surrounding the trade tensions between the United States and China causing prices to soften.

Despite positive trade headlines on Wednesday, an uptick in tensions overnight and lingering fears that the ongoing trade war between the two nations will affect metals demand continued to dampen sentiment.

On Wednesday, China’s Ministry of Commerce released a statement saying the country is confident it will be able to implement changes agreed between US President Donald Trump and his Chinese counterpart Xi Jinping at this past weekend’s Group of Twenty (G20) gathering in Argentina.

Shortly after the statement, Trump re-tweeted “China officially echoed President Donald Trump’s optimism over bilateral trade talks. Chinese officials have begun preparing to restart imports of US soybeans & liquified natural gas, the first sign confirming the claims of President Donald Trump and the White House that China had agreed to start ‘immediately’ buying US products.”

Trump added “Very strong signals being sent by China once they returned home from their long trip, including stops, from Argentina. Not to sound naive or anything, but I believe President Xi meant every word of what he said at our long and hopefully historic meeting. ALL subjects discussed!”

The headlines helped stabilize sentiment after a rough day or two, according to ANZ Research.

But concerns about US-China trade relations deepened overnight following news that the chief financial officer of Chinese tech giant Huawei, one of the world’s largest telecommunications equipment and services providers, has been arrested in Canada and faces extradition to the US.

“We are closely watching the developments in Asia after reports that Canada has arrested the Huawei CFO facing US extradition for allegedly violating Iran sanctions,” Stephen Innes, Oanda’s head of trading for Asia Pacific, said in a morning note.

“This headline is quite significant as the US government is attempting to persuade allies to stop using Huawei equipment due to security fears, and this headline could weigh negatively on tech stocks,” Innes added.

As a result of the uncertainty in the market, investors are shying away from riskier assets with base metals prices on the SHFE generally trending lower this morning.

The most-traded February copper contract on the SHFE stood at 49,100 yuan ($7,157) per tonne as at 10.40 am Shanghai time, down by 250 yuan per tonne from Wednesday’s close.

The red metal continues to contend with worries over slowing demand in China; import activity in Shanghai has slowed over the past two months, while copper premiums in the region fell to their lowest in over a year on Tuesday – both indicative of lower demand in the country.

Faring better than its peers, zinc continued to benefit from supportive fundamentals factors; the most-traded January zinc contract on the SHFE was little changed with a slight upward bias this morning, inching 5 yuan per tonne higher to 21,290 yuan per tonne as at 10.40 am Shanghai time.

At present, zinc stocks at SHFE and London Metal Exchange warehouses have both declined to historically low levels, and domestic zinc stocks in China are unlikely to recover in the short term, according to Chinese broker Zhongxin Futures.

Deliverable zinc stocks at SHFE-approved warehouses dropped 8,673 tonnes or 24.5% from November 23 to 26,779 tonnes as of November 30 – marking a fresh nine-year low.

“Zinc ingot supply is comparatively tight and that will continue to support zinc prices in the short term. But slower consumption in China and looser domestic zinc concentrate market should limit any price rallies for the metal,” Zhongxin Futures said.

Base metals prices

  • The SHFE January aluminium contract dipped by 65 yuan per tonne to 13,650 yuan per tonne.
  • The SHFE January lead contract edged down by 15 yuan per tonne to 18,520 yuan per tonne.
  • The SHFE January nickel contract fell by 260 yuan per tonne to 90,670 yuan per tonne.
  • The SHFE January tin contract was down by 510 yuan per tonne to 145,010 yuan per tonne.

Currency moves and data releases

  • The dollar index was down by 0.01% at 97.035 as at 10.54 am Shanghai time.
  • In equities, the Shanghai Composite was down by 1.28% at 2,615.82 as at 11.30 am Shanghai time.
  • In data on Thursday, US releases of note include challenger job cuts, ADP non-farm employment change, revised non-farm productivity and unit labor costs, trade balance, unemployment claims, finals services purchasing managers’ index (PMI), the ISM non-manufacturing PMI, factory orders and crude oil inventories. US Federal Reserve chairman Jerome Powell is also due to speak.
  • In addition, there are Organization of Petroleum Exporting Countries (OPEC) meetings throughout the day.

London Metal Exchange, base metals prices

Shanghai Futures Exchange, base metals prices

Changjiang spot prices, base metals prices