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

Base metals prices on the Shanghai Futures Exchange registered gains across the board during Asian morning trading on Monday September 10, following the release of better-than-expected trade data from China over the weekend despite deteriorating relations with the United States.

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.