LIVE FUTURES REPORT 12/09: SHFE base metals prices little changed ahead of China holiday

Base metals prices on the Shanghai Futures Exchange were little changed during the morning session on Thursday September 12, with trading activity light ahead of a national holiday in China on Friday to mark the Mid-Autumn Festival.

While most of the SHFE base metals prices drifted higher following news that US President Donald Trump had agreed to postpone a latest round of tariff increases on Chinese goods until mid-October, a firmer dollar was a headwind for the complex and kept gains limited.

The most-traded November copper contract stood at 47,310 yuan ($6,646) per tonne as at 11:28 am Shanghai time, up by 20 yuan - or 0.04% - per tonne compared with Wednesday’s close of 46,290 yuan per tonne.

“The nascent thaw in US and China trade relations appears to be gathering momentum ahead of October trade talks,” Jeffrey Halley, senior market analyst at online trading services provider Oanda, said in a morning note.

“President Trump agreed to postpone the latest round of tariff hikes until mid-October as China celebrates its 70th birthday on October 1st, the early birthday present follows China’s announcement yesterday that it will exempt some US products from its tariff schedule,” Halley added.

A growing tightness of physical copper in Shanghai has boosted copper cathode premiums in the city to a nine-month high, which could in turn lend support to futures copper prices.

Fastmarkets assessed the copper grade A cathode premium, in-whs Shanghai at $70-85 per tonne on September 5, marking the premium’s highest level, basis the midpoint of the range, since November 2018. The premium had been assessed at $58-75 per tonne and $50-68 per tonne on August 5 and July 4 respectively.

“Fundamentally, we believe that copper is due to strengthen in the final months of the years because the refined market tightness is likely to become increasingly visible,” Fastmarkets research analyst Boris Mikanikrezai said.

“In the very short term, the macro situation will be the key,” Mikanikrezai added. “The excessively bearish copper speculative positioning suggests that a short-covering rally in the near term is more likely than not.”

Other highlights

  • Zinc and nickel prices on the SHFE edged lower during morning trading on Thursday, likely responding to the firmer dollar overnight and consolidating after recent gains.
  • The dollar index stood at 98.63 as at 11.28am Shanghai time. This compares with a reading of 98.35 at a similar time on Wednesday.
  • In data on Wednesday, Chinese banks extended 1.21 trillion yuan in new loans last month, up from 1.06 trillion yuan in July. Broad M2 money supply in the country grew by 8.2% year on year in August, in line with analysts’ forecasts.
  • In data on Thursday, the European Central Bank will have its rate decision, monetary policy statement and press conference, while US releases include the consumer price index and unemployment claims.
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