LIVE FUTURES REPORT 11/09: SHFE base metals prices mixed, risk-off sentiment returns

“Stronger-than-forecast Chinese trade data released over the weekend together with positive inflation figures suggests the economy has shrugged off rising trade uncertainties. At the same time tensions appear set to escalate after US President Donald Trump threatened to impose tariffs on a further $267 billion of Chinese goods, atop the $200 billion imports already in consideration,” Metal Bulletin analyst James Moore said.

Aluminium proved the most resilient of the base metals with its most-traded November contract rising 0.7%. Light metal prices continue to receive support from supply-side issues, such as the ongoing strike at Alcoa’s alumina operations in Western Australia that has caused the price of the raw material to rise significantly.

Metal Bulletin’s alumina index fob Australia stood at $635.81 per tonne on Monday, edging closer to the historical high of $707.75 per tonne seen in April, when the US announced sanctions on major Russian aluminium producer, UC Rusal.

Rusal is expected to cut production from September if US sanctions are not lifted, Moore noted. Some market participants expressed concerns that the US will take a tougher stance on Russia – and affect its decision on Rusal’s fate – as the North American country heads to its mid-term elections in November. Many will be looking for clarity on this issue at Metal Bulletin’s annual aluminium conference in the German capital of Berlin this week.

Monday’s outperformer, lead, reversed its direction alongside sister metal zinc – the only two metals to register falls in the SHFE base metals complex – with lead’s most-traded October contract falling 0.6%. Zinc’s most-traded October contract reflected a bigger drop of 0.9%.

The zinc market has seen a relatively tight supply situation due to environmental inspections in China that resulted in a year-on-year drop of 3.5% in production to 439,000 tonnes in July, according to the latest data from China’s National Bureau of Statistics.

But Metal Bulletin Research noted that tightness has started easing since major projects such as Vedanta Resources’ Gamsberg mine and the restarted Century mine in Australia have started production.

Base metals prices

• The SHFE November nickel contract was up 580 yuan per tonne to 102,440 yuan per tonne.
• The SHFE October zinc contract fell 200 yuan per tonne to 21,045 yuan per tonne.
• The SHFE October lead contract dropped 110 yuan per tonne to 18,935 yuan per tonne.
• The SHFE January tin contract was up 280 yuan per tonne to 145,270 yuan per tonne.
• The SHFE November copper contract climbed up by 230 yuan per tonne to 47,690 yuan per tonne.
• The SHFE November aluminium contract ticked up by 105 yuan per tonne to 14,750 yuan per tonne.

Currency moves and data releases

• The dollar index was relatively unchanged at 95.21 as at 9am Shanghai time.
• In other commodities, the Brent crude oil spot price was at $77.38 per barrel as at 9.01 am Shanghai time.
• In equities, the Shanghai Composite fell 0.36% to 2,660.01 as at 10.34am Shanghai time.
• In data on Monday, UK gross domestic product (GDP) expanded by 0.3% in July, beating an expected rise of 0.2% and a 0.1% increase in the prior month. UK manufacturing production figures for July disappointed, however, with a month-on-month decline of 0.2%, versus an expected 0.2% gain.
• The total UK trade deficit narrowed to £10 billion ($13 billion) during July, down from £10.7 billion previously.
• In data today, we have the UK’s average earnings index, claimant count change and the unemployment rate and the German ZEW economic sentiment.
• In addition, final wholesale inventories and Jolts job openings from the US are also due.