LIVE FUTURES REPORT 10/09: SHFE base metals prices all up, China trade data supports

According to data released on September 8 by the Customs General Administration of China, the country’s August yuan-denominated exports rose 7.9% from a year earlier, beating a forecast 5.7% increase.

Exports to the US, in particular, rose by 6.9% from July to $44.38 billion, widening the trade surplus gap – a bone of contention between the two countries – by around 10% month-on-month to $31 billion.

Despite new threats from the US last Friday to slap tariffs on $267 billion in Chinese goods on top of the duties already imposed on $50 billion and the $200 billion in the pipeline, China’s resilient export performance, plus better-than-expected consumer price index (CPI) data announced early Monday morning – see data section below – warded off negative sentiment and lent firm support to the base metals complex.

Lead was the outperformer with a gain of 1.8% in its most-trade October contract. The heavy metal is benefitting from the positive macroeconomic factors mentioned above, coupled with improved micro-dynamics.

According to Metal Bulletin analyst Andy Farida, global inventory levels of refined lead metal have continued to decline; London Metal Exchange lead stocks dipped 225 tonnes to 121,400 tonnes on September 7, which is down 14.6% from the 142,225 tonnes recorded on January 2. SHFE lead stocks fell 1,054 tonnes to 16,847 tonnes at the end of last week, which is down by 59.7% from the beginning of this year.

Zinc and nickel were the second best performers of the complex with both metals’ most-traded contracts increasing by 0.8%.

Aluminium prices were similarly firm, with the light metal’s most-traded November contract up by 0.4%. The metal has found support from a prolonged strike at Alcoa’s Western Australian alumina operations, which has continued to tighten supply in the market.

According to ANZ Research, the operation, which accounts for 7% of world alumina supply, has already been impacted by the strike action for a month.

“For the moment, the strike has only impacted output by 15,000 tonnes, out of a total 9 million tonnes. However, this comes amid supply disruptions in China and Brazil, as well as US sanctions on Russia impacting trade flows in general,” ANZ Research said in a morning note.

Base metals prices

• The SHFE November nickel contract was up 770 yuan ($228) per tonne to 101,870 yuan per tonne.
• The SHFE October zinc contract rose 170 yuan per tonne to 21,285 yuan per tonne.
• The SHFE October lead contract increased 330 yuan per tonne to 18,975 yuan per tonne.
• The SHFE January tin contract was up 1,050 yuan per tonne to 144,560 yuan per tonne.
• The SHFE November copper contract climbed up by 130 yuan per tonne to 47,690 yuan per tonne.
• The SHFE November aluminium contract ticked up by 60 yuan per tonne to 14,715 yuan per tonne.

Currency moves and data releases

• The dollar index was down slightly at 95.35 as at 9.31am Shanghai time.
• In other commodities, the Brent crude oil spot price was at $77.14 per barrel as at 9.34 am Shanghai time.
• In equities, the Shanghai Composite fell 0.34% to 2,693.11 as at 11.07am Shanghai time.
• In a busy day for data last Friday, the German trade surplus for August, at a four-year low of €15.8 billion ($18.3 billion), was short of the expected €19.1 billion and below the previous figure of €19.3 billion. The French trade deficit improved to €3.5 billion over the same period from €6.1 billion previously, beating an expected deficit of €5.7 billion.
• German industrial production fell 1.1% in August from the prior month, which was bigger than the 0.7% month-on-month decline seen in July. The French equivalent was flat month on month with a 0.7% increase in August.
• In US data last Friday, the August jobs report showed average hourly earnings increased by 0.4% month on month to 2.9% year on year, outstripping expected rises of 0.2% month on month and 2.7% year on year. The non-farm employment change showed 201,000 Americans joined the workforce last month, more than the forecast 191,000. The unemployment rate was unchanged at 3.9%, holding near its lowest since the 1960s.
• Data out already on Monday showed China’s CPI increased to 2.3% in August, surpassing an expected print of 2.1%. The country’s producer price index (PPI) rose 4.1% last month, slowing from the previous month’s 4.6% growth, but was in line with expectations.
• Later, we have the United Kingdom’s gross domestic product (GDP), manufacturing production, goods trade balance, construction output and industrial production of note.