LIVE FUTURES REPORT 11/01: SHFE base metals prices extend losses; lead, tin edge up

Lead and tin bucked the weaker tone observed in their peers this morning, with both metals finding support from tightened supply.

Weaker-than-expected producer price index (PPI) and consumer price index (CPI) data from China continues to dent investors’ appetite for riskier assets, spurring a sell-off across most of the base metals on the SHFE, with nickel and copper leading the decline.

China’s PPI rose 0.9% year on year in December 2018, while the CPI rose by 1.9% in the same comparison – both indices hitting their lowest growth rates in over two years.

Meanwhile, a marginally stronger dollar following a positive US jobless claims release overnight has also added to the bearish sentiment across the SHFE base metals.

That said, comments from US Federal Reserve chairman Jerome Powell reiterating the “waiting and watching, patient and flexible” message on Thursday capped any significant gains in the dollar index.

The US dollar index had undergone a short rally overnight, reaching a high of 95.63 before retreating. The index was down 0.05% to 95.43 as of 10.20am Shanghai time and remains well below the psychological level of 96 following dovish rhetoric from US Federal Reserve officials.

The most-traded March copper contract price on the SHFE dropped to 47,170 yuan ($6,943) per tonne as at 10.19am Shanghai time, down by 340 yuan per tonne from Thursday’s close.

Nickel similarly fell sharply this morning, with the most-traded May nickel contract price down by 700 yuan per tonne at 90,860 yuan per tonne.

Lead and tin were the most resilient of the SHFE base metals this morning, both benefitting from a robust fundamental backdrop.

“Lead still has a robust fundamental backdrop, which has tightened in 2018 and these tightening elements should get more prominent this year, with global inventory levels already running low, depressed treatment charges (TCs) and another market deficit to boot,” Fastmarkets analyst Andy Farida said.

Fastmarkets assessed TCs for low-silver lead concentrate at $10-25 per tonne at the end of last month, the lowest since February 2018, down from $20-45 per tonne on September 28, 2018.

Similarly, tightening supply amid continued delays in shipments from Indonesia remain a strong supportive factor to tin prices.

“Tin exports from Indonesia totaled 5,150 tonnes last month, while there have been no trades on the Indonesia Commodity & Derivatives Exchange (ICDX) – a prerequisite to export – so far in January,” Fastmarkets analyst James Moore said.

Base metal prices

• The SHFE March copper contract price dropped by 340 yuan per tonne to 47,170 yuan per tonne.
• The SHFE March aluminium contract price dipped by 5 yuan per tonne to 13,400 yuan per tonne.
• The SHFE March zinc contract price fell by 115 yuan per tonne to 20,300 yuan per tonne.
• The SHFE February lead contract price rose by 100 yuan per tonne to 17,550 yuan per tonne.
• The SHFE May tin contract price moved up by 220 yuan per tonne to 146,570 yuan per tonne.
• The SHFE May nickel contract price declined by 700 yuan per tonne to 90,860 yuan per tonne.

Currency moves and data releases

• The dollar index was down 0.05% to 95.43 as of 10.20am Shanghai time.
• In equities, the Shanghai Composite was up 0.13% to 2537.74 at morning close.
• In data on Thursday, China’s CPI rose by 1.9% year on year in December, less than an estimated increase of 2.1%. The country’s PPI for the same month was similarly lower than expected, with a 0.9% year-on-year gain – an increase of 1.6% had been forecast.
• French industrial production fell 1.3% in November 2018, against expectations that the rate would be unchanged, while Italian retail sales for the same month were up by 0.7% compared with October 2018.
• In US releases on Thursday, weekly unemployment claims stood at 216,000, down from 233,000 previously, while natural gas supplies fell by 91 billion cubic feet to 2.6 trillion cubic feet in the week ended January 4.
• In European data on Friday, there is Italian industrial production and a host of releases from the United Kingdom including gross domestic product (GPD), manufacturing production, construction output, goods trade balance, index of services and industrial production.
• Later on Friday, the United States will release federal budget and CPI data.