LIVE FUTURES REPORT 11/07: SHFE base metals prices fall heavily amid mounting trade tensions

Base metals prices on the Shanghai Futures Exchange fell sharply during Asian morning trading on Wednesday July 11, with China-US trade tensions once again weighing on the market.

Base metals prices were down across the board following the overnight release of a list of an additional $200 billion in Chinese goods on which the United States is considering imposing 10% tariffs.

The tariffs will not go into effect immediately, but will undergo a two-month review process, with hearings on August 20-23.

The announcement of further tariffs reignited fears that a widening trade war between the world’s two largest economies could bring about a slowdown in global economic growth.

Zinc led the SHFE base metals complex lower, with the metal’s most-traded September contract declining to 20,630 yuan ($3,113) per tonne as at 10.20am Shanghai time, down by 4.6% or 985 yuan per tonne from Tuesday’s close.

Weakness on the London Metal Exchange on Tuesday has filtered through to Asia this morning, which has also impacted sentiment toward SHFE zinc, a Shanghai-based analyst told Metal Bulletin.

The LME’s three-month zinc price ended trading on Tuesday down by 2.8% or $75 per tonne at $2,630 per tonne, with the metal struggling against a tight fundamental backdrop.

LME zinc has fallen more than 17% in a month and is down nearly $1,000 per tonne from the 2018 high of $3,582 per tonne reached on February 15.

“We envisage a short-term recovery in the LME zinc price but the upside momentum is likely to be limited,” Metal Bulletin Research analyst Andy Farida said. “This is because both the macro and micro dynamics in the next few months remain hazy and fraught with uncertainty.”

Similar weakness was seen in the rest of the SHFE base metals in the early Asian session on Wednesday. Copper slumped nearly 3%, while nickel fell more than 2%.

Tin was the most resilient of the complex with a decline of 1.2%.

Base metals prices

  • The SHFE September nickel contract price fell 2,390 yuan per tonne to 109,600 yuan per tonne.
  • The SHFE September copper contract price dropped 1,420 yuan per tonne to 48,340 yuan per tonne.
  • The SHFE September aluminium contract price tumbled 210 yuan per tonne to 13,975 yuan per tonne.
  • The SHFE September tin contract price slid 1,730 yuan per tonne to 142,370 yuan per tonne.
  • The SHFE August lead contract price slumped 290 yuan per tonne to 19,175 yuan per tonne.

Currency moves and data releases

  • The dollar index was up by 0.1% to 94.24 as at 11.22am Shanghai time.
  • In other commodities, the Brent crude oil spot price was down by 0.02% to $78.00 per barrel as at 10.25am Shanghai time.
  • In equities, the Shanghai Composite was down by 1.71% to 2,779.13 as at 11.22am Shanghai time.
  • In data on Tuesday, UK gross domestic product (GDP) rose 0.3% in May, from 0.2% in April, while manufacturing production rebounded to 0.4% – against an expected 1.0%.
  • US data showed National Federation of Independent Business (NFIB) small business optimism came in at 107.2, surpassing the forecast print of 105.6. Meanwhile, the Job Openings and Labour Turnover Survey (Jolts) reading stood at 6.64 million in May, versus an expected 6.88 million.
  • In data today, we have the US core and headline producer price index (PPI) and crude oil inventories of note.
  • In addition, European Central Bank president Mario Draghi, Bank of England governor Mark Carney and US Federal Open Market Committee members Raphael Bostic and John Williams are speaking.