LIVE FUTURES REPORT 13/09: SHFE base metals prices largely recover on proposed US-China trade talks, weak dollar

The market took news of the resumption of trade talks between the US and China positively as, unlike the failed low-rank negotiations last month, the US has requested the Chinese dispatch a ministerial-level delegation to the new round of talks. The two camps have yet to decide whether to hold the anticipated meeting in Washington or Beijing.

Nevertheless, the announcement was enough to raise hopes again of these economic powerhouses finding a solution to manage, if not settle, this trade spat that has had a negative effect on investor confidence and the global economy.

Interestingly, Washington’s softer stance on its trade dispute with Beijing comes after reports this week that China is planning to seek permission from the World Trade Organization to sanction the US for non-compliance with a ruling concerning dumping duties, a retaliatory move following US President Donald Trump’s threats to impose fresh tariffs on $267 billion of Chinese goods.

Meanwhile, the weakening of the dollar to 94.81 as at 9.03am Shanghai time, from 95.35 at roughly the same time on Monday, has further supported the relief rally in the SHFE base metals complex.

Zinc demonstrated the biggest jump, with its most-traded November contract rebounding 1.7%. Short-term expectations for this market still point to some tightness.

According to Metal Bulletin analyst Andy Farida, refined zinc metal production in China could trend lower in the second half of 2018. Data from the International Lead & Zinc Study Group showed an 8.6% decline in Chinese ore output over the first six months of the year caused by strict environmental inspections and shutdowns of illegal small-to-medium zinc mines.

Nickel, which led the declines on Wednesday, showed the second highest recovery, with its most-traded November contract rising 1.6%. Underlying fundamentals for this metal remain bullish, according to Metal Bulletin Research. Latest figures from the International Nickel Study Group reflected an 81,100-tonne deficit in January-June 2018 and this is expected to widen to 117,000 tonnes by the end of the year.

The most-traded November contract for copper increased by 1.5%. The October lead and November aluminium contracts showed marginal gains of 0.2% and 0.1% respectively. Tin bucked the trend, with its most-traded January contract little changed.

Base metals prices

• The SHFE November nickel contract was up 1,580 yuan ($230) per tonne to 103,510 yuan per tonne.
• The SHFE November zinc contract rose 345 yuan per tonne to 20,770 yuan per tonne.
• The SHFE October lead contract increased 45 yuan per tonne to 18,915 yuan per tonne.
• The SHFE January tin contract was down 30 yuan per tonne to 144,090 yuan per tonne.
• The SHFE November copper contract climbed 720 yuan per tonne to 48,450 yuan per tonne.
• The SHFE November aluminium contract rose 10 yuan per tonne to 14,565 yuan per tonne.

Currency moves and data releases

• The dollar index was slightly weaker at 94.81 as at 9.03am Shanghai time.
• In other commodities, the Brent crude oil spot price was at $79.48 per barrel as at 9.03 am Shanghai time.
• In equities, the Shanghai Composite rose 0.28% to 2,663.57 as at 11am Shanghai time.
• In US data Wednesday, producer prices fell unexpectedly in August with a 0.1% month-on-month decline. It was the first drop since February 2017.
• US crude oil inventories fell a larger-than-expected amount in the week ended September 7, with a decline of 5.3 million barrels compared with an expected fall of 1.3 million barrels.
• In data overnight, the US Federal Reserve released its Beige Book, noting moderate growth in economy.
• US data of note on Thursday includes the consumer price index (CPI) and unemployment claims.
• EU data on Thursday will focus on CPI from Germany and France, as well as Switzerland’s producer price index. The UK will also report on official bank rates, asset purchase facility, and provide a summary on its monetary policy.

[Editor’s note: This article was updated on Friday September 14 to replace the price table for the London Metal Exchange three-month base metals prices, which due to an input error, had previously displayed the figures for the zinc, tin and nickel prices next to the incorrect metal.]