LIVE FUTURES REPORT 12/07: SHFE base metals prices correct after Wednesday’s sharp falls

Most base metals prices on the Shanghai Futures Exchange staged a recovery during Asian morning trading on Thursday July 12, with only lead weakening.

Nickel led the rebound with a 3.8% gain, while copper jumped by 1.2%. The other metals also logged gains in the early session, albeit at a more moderate pace, while lead bucked the general strength to fall by 0.2%.

The firmer tone in the SHFE base metals complex comes after prices fell heavily on Wednesday amid an escalation in the trade spat between China and the United States, with the former threatening to impose fresh tariffs on $200 billion worth of Chinese goods.

The flare up in trade tensions between the world’s two largest economies dented investor sentiment, causing the base metals to retreat on Wednesday.

But prices have rebounded this morning, with some in the market suggesting that the move down was an overreaction to the trade war headlines and prices must now correct.

“The SHFE base metals are correcting after the big falls on Wednesday, which were down to an overreaction in the market to [US President Donald] Trump’s plans for additional tariffs on China,” a Shanghai-based analyst told Metal Bulletin.

“Concerns about a trade war hurting commodities are overdone, so expect prices to continue higher,” analysts with Goldman Sachs noted.

Nickel was the outperformer on the SHFE this morning with its most-traded September nickel contract rising to 113,510 yuan ($17,013) per tonne as at 11am Shanghai time, an increase of 4,140 yuan per tonne from Wednesday’s close.

Nickel continues to benefit from a positive fundamental backdrop with combined global stocks down by 27.1% in the first six months of 2018, with these drawdowns persisting into the third quarter, according to Metal Bulletin analyst Andy Farida.

Deliverable nickel stocks at SHFE-approved warehouses fell 2,630 tonnes or 9.7% to 24,367 tonnes in the week to July 6.

Base metals prices

  • The SHFE September zinc contract rose by 200 yuan per tonne to 20,745 yuan per tonne.
  • The SHFE September copper contract recovered by 570 yuan per tonne to 48,690 yuan per tonne.
  • The SHFE September aluminium contract was up by 120 yuan per tonne to 14,130 yuan per tonne.
  • The SHFE September tin contract increased by 980 yuan per tonne to 143,570 yuan per tonne.
  • The SHFE August lead contract dipped by 35 yuan per tonne to 19,010 yuan per tonne.

Currency moves and data releases

  • The dollar index was up by 0.03% to 94.75 as at 11.47am Shanghai time.
  • In other commodities, the Brent crude oil spot price was up by 0.72% to $74.63 per barrel as at 11.11am Shanghai time.
  • In equities, the Shanghai Composite was up by 1.90% to 2,830.44 as at 11.30am Shanghai time.
  • In US data on Wednesday, the core and headline producer price indices (PPI) for June were both better than expected with a 0.3% increase – both beating forecast increases of 0.2%.
  • Weekly crude oil inventories fell by 12.6 million barrels in the week to July 6, a far bigger decline than the forecast 4.1-million-barrel drop.
  • In data today, we have US headline and core consumer price indices (CPI) and unemployment claims of note.