LIVE FUTURES REPORT 13/05: Intensifying trade war pressures SHFE base metals prices, only Al manages to secure gains

With the exception of aluminium, base metals prices on the Shanghai Futures Exchange were down during morning trading on Monday May 13, with a further ratcheting up of US-China trade tensions stifling investors’ appetite for commodity investment.

The risk-off mood among investors this morning follows last week’s imposition of increased tariffs on Chinese goods by the United States and the ending of trade negotiations between the two nations without a deal being struck.

On Friday, the US decided to increase tariffs on $200 billion worth of Chinese goods to 25% from 10%, fulfilling a threat made days earlier by US President Donald Trump because US-China trade negotiations were moving “too slowly”.

The Chinese government remained defiant, however, saying it would be forced to retaliate to the higher tariffs but has not specified how.

“It remains to be seen how the markets will react this week once they are back in full swing, but the news on the trade-tariff front is anything other than reassuring,” David De Garis, senior economist with National Australia Bank, said on Monday.

“The trade talks have ended without any deal, the US has increased its existing tariff of 10% on the $200bn to 25%, to apply to Chinese exports leaving from the end of last week, and the US is putting together the paper work for tariffs on the remaining $300bn of Chinese imports,” De Garis added.

Yet it was not all bad news on the trade front with White House economic advisor Larry Kudlow saying there is a “strong possibility” that Trump will meet Chinese President Xi Jinping at a Group of Twenty (G20) summit in Japan on June 28-29. But Kudlow reiterated that no new US-China talks are yet scheduled.

As a result, base metals prices on the SHFE were broadly down this morning, with losses ranged between 0.2% for copper and 0.7% for nickel.

The most-traded June nickel contract price slid to 96,060 ($14,065) yuan per tonne as at 10.12am Shanghai time, down by 630 yuan per tonne from Friday’s close of 96,690 yuan per tonne.

Nickel came under additional pressure from weak market fundamentals.

“Downstream consumption for nickel is not good… Moreover, stocks of the electrolytic nickel are also picking up, partly due to Indonesia raising the approved total quota of production of nickel to 5.98 million wet tonnes,” an analyst with Chinese brokerage Citic Futures said on Monday.

Other highlights

  • Aluminium was the lone SHFE base metal in positive territory on Monday morning. The most-traded June aluminium contract price on the SHFE rose by 70 yuan per tonne or 0.1% to 14,200 yuan per tonne as at 10.03am Shanghai time.
  • The Shanghai Composite Index declined 0.98% to 2,910.87 as at 11.12 am.
  • The US dollar index inched up by 0.03% to 97.33 as at 10.12am Shanghai time
  • In US data on Friday, CPI and Core CPI – measures of inflation – were up 0.3% and 0.1% respectively.
  • There is no major data due on Monday other than a speech by US Federal Open Market Committee member Richard Clarida.