LIVE FUTURES REPORT 09/03: Tariff news sinks SHFE base metals prices; tin, aluminium hold up relatively well

Tin prices led on the upside with a 1% gain, followed by a 0.3% rise in aluminium prices, while the rest of the complex was down by between 0.4% and 0.8%.

The base metals have generally struggled this morning with the market mulling over the implications of Trump signing his proposed import tariffs into law and what sort of retaliatory actions may come as a result. A firmer dollar also added to the gloomy mood in the market.

Tin prices have been supported by record-low stock levels on the London Metal Exchange. LME tin stocks stood at 1,555 tonnes on Thursday, with the material in tight hands – one entity holds 90-100% of warrant positions.

The SHFE May tin contract price increased by 1,510 yuan ($238) or 1% to 147,120 yuan per tonne as of 10.03am Shanghai time. This follows a strong performance for the metal on the LME yesterday, when the three-month price closed the day $170 higher at $21,545 per tonne.

Meanwhile, aluminium was the only other metal in positive territory this morning. The most-traded May aluminium contract on the SHFE rose by 45 or 0.3% to 14,275 yuan per tonne.

“We had hoped that the US’ trade action would help to put pressure on China aluminium prices [pushing them lower], but the 10% tariff seems to be a little on the low side, so when [the tariff] was officially signed, the bulls came back into the market,” a Shanghai trader said.

Trump signed off on the blanket tariffs – 25% on steel imports, 10% on aluminium imports – that he announced last week in response to the Section 232 investigation into steel and aluminium imports on a national security basis, but excluded North American Free Trade Agreement members Canada and Mexico. The tariffs will go into effect in 15 days.

“Canada and Mexico were excluded… which makes me think that domestic aluminium production in the US will not ramp up,” a trader based in Shenzhen told Metal Bulletin.

This morning, China expressed “strong opposition” to the US tariffs on steel and aluminium, saying the move will significantly undermine international trade order.

The US is protecting domestic trade in the name of national security, said Wang Hejun, a senior official at China’s Ministry of Commerce.

If the US measures impair Chinese interests, China will join efforts with other affected countries to safeguard its own benefits, Wang added.

With depressing inevitability, other nations and trading blocs will cry “foul” and reach for the drawer marked “retaliation”, almost certainly leading to a wider and broader trade war, according to Martin Hayes.

Other metals weaker

• The SHFE May copper contract decreased by 330 yuan or 0.6% to 51,690 yuan per tonne.
• China imported 1.45 million tonnes of copper ore and concentrates in February, up by 12.7% year on year, preliminary Chinese customs data showed.
• The SHFE April lead contract price declined by 100 yuan or 0.5% to 18,480 yuan per tonne.
• The SHFE May zinc contract fell 200 or 0.8% yuan to 24,900 yuan per tonne.
• The SHFE July nickel contract decreased by 440 yuan or 0.4% to 100,810 yuan per tonne.

Currency moves and data releases

• The dollar index was up by 0.02% at 90.2 as of 11.04am Shanghai time.
• In other commodities, the Brent crude oil spot price was down by 0.07% to $63.78 per barrel as of 11.04am Shanghai time.
• In equities, the Shanghai Composite was up by 0.1% to 3,291.77 as of 11.05am Shanghai time.
• In data on Thursday, US unemployment claims came in at 231,000, above the forecast of 220,000 and the previous week’s reading of 210,000.
• In data today, China’s consumer prices rose by 2.9% year on year in February – the biggest jump in inflation since November 2013 and higher than expected growth of 2.5%. The country’s producer prices increased by 3.7% year on year last month, just below forecasts of a 3.8% rise.
• Later, there is UK manufacturing production, goods trade balance, construction output, consumer inflation expectations and industrial production due. US employment data including average hourly earnings, non-farm employment change and the unemployment rate is also expected.

To read all the latest news on the impact of the Section 232 tariffs, click here.