LIVE FUTURES REPORT 12/11: SHFE base metals prices slide on strong dollar, Sino-US trade tensions; zinc bucks trend

Base metals prices on the Shanghai Futures Exchange were broadly down during Asian morning trading on Monday November 12, dragged down by a strong dollar and negative sentiment surrounding the ongoing trade spat between the United States and China. Only zinc managed to buck the downward trend.

The SHFE base metals have reversed most of the gains attained last Friday after a firmer dollar and renewed negativity in the market spooked investors, limiting trading activity this morning while participants took up wait-and-see positions.

The dollar strengthened to 97.00 as at 10.38am Shanghai time compared with a reading of 96.65 at roughly the same time last Friday.

The dollar has been supported by expectations that the US Federal Reserve will continue tightening monetary policy, with another increase in US interest rates widely expected next month.

Adding further downward pressure to the SHFE industrial metals prices was the persistent negativity in the market stemming from concerns over the US-China trade war that has dragged on this year. With little progress being made in talks between the two nations, the market remains cautious and sensitive to any rhetoric-induced volatility.

This negativity has largely stemmed from the uncertainty surrounding the upcoming meeting between US President Donald Trump and China’s President Xi Jinping at the G20 meeting in Argentina at the end of this month and whether a deal between the world’s two largest economies can eventually be reached.

Yet even if the two sides’ deep differences can be overcome, any trade deal is likely to take months to work out and therefore is unlikely to provide immediate relief for those that have been affected by the tit-for-tat tariffs that the US and China have imposed on each other.

As a result, base metals prices on the SHFE were down, with only zinc managing to remain in positive territory. The biggest loser was nickel, which continues to contend with a narrowing supply deficit and a ramp-up in nickel pig iron (NPI) production.

The most-traded nickel January contract on the SHFE plunged 1.7% to 94,710 yuan ($13,611) per tonne as at 10:38am Shanghai time, down by 1,600 yuan per tonne from last Friday’s close.

The global nickel supply deficit for 2019 is expected to narrow to 22,000 tonnes from 143,000 tonnes in 2018, mainly due to the ramp-up in NPI output next year, Xu Aidong, chief analyst of Chinese research organization Antaike.

This view is supported by data from the International Nickel Study Group, which states the deficit in the refined nickel market has contracted from 97,100 tonnes in the first seven months of this year to 95,500 tonnes in January-August.

According to Metal Bulletin analyst Andy Farida, “nickel faces greater downside risks from the decline in demand from Chinese stainless steel mills, against the optimistic demand outlook of nickel consumption in the production of electric car batteries.”

In addition, there is growing risks that NPI production ramp-ups in 2019 are set to minimize the supply deficit in the global nickel market, Farida added.

Yet it was not all bad news for the SHFE base metals, with zinc prices continuing their upward trend seen last Friday.

The most-traded January zinc contract rose by 0.9% or 180 yuan per tonne to 21,110 yuan per tonne as at 10.38am, with the metal likely finding support from persistent drawdowns in exchange inventories.

At 37,378 tonnes last Friday, zinc stocks at SHFE-approved sheds are down by 51.7% from the beginning of the year.

“[This] continues to reflect strong domestic demand and continuing tightness in the zinc concentrate market,” Farida added.

Base metals prices

  • The SHFE December copper contract fell 180 yuan to 49,170 yuan per tonne.
  • The SHFE January aluminium contract edged down 15 yuan per tonne to 13,885 yuan per tonne.
  • The SHFE December lead contract lost 90 yuan per tonne to 18,460 yuan per tonne.
  • The SHFE January tin contract plummeted 430 yuan per tonne to 149,230 yuan per tonne.

Currency moves and data releases

  • The dollar index gained 0.09% to 97.00 as at 10.38 am Shanghai time.
  • In other commodities, the Brent crude oil spot price rose 1.1% to $70.92 per barrel as at 10.38 am Shanghai.
  • In equities, the Shanghai Composite inched up 0.18% to 2,604 as at 10.42 am Shanghai time.
  • In data on Monday, US Federal Open Market Committee member Mary Daly is speaking.

London Metal Exchange, base metals prices

Shanghai Futures Exchange, base metals prices

Changjiang spot prices, base metals prices

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