LIVE FUTURES REPORT 14/03: SHFE base metals prices mixed following mediocre Chinese data

Base metals prices on the Shanghai Futures Exchange were mixed during the morning trading session on Thursday March 14, with lackluster Chinese data released earlier in the day failing to inspire a meaningful move in either direction for the complex.

Data released by China’s National Bureau of Statistics (NBS) at around 10am Shanghai time on Thursday showed the country’s economy slowed further in the first two months of 2019 after growth of industrial production fell to 5.3% in January-February, down from 5.7% in the same period a year ago. It was also below the expected gain of 5.5%.

China combines January and February activity data to smooth seasonal distortions that may be caused by the long Lunar New Year holidays early each year.

Growth in China’s fixed asset investment quickened to 6.1% for the first two months of 2019, in line with analysts’ forecasts and up from 5.9% previously. Retail sales were marginally better than expected with a year-on-year rise of 8.2% in January-February – forecasts had been for an 8.1% increase.

“All eyes will be on the Chinese economic data released today for any signs of rebound in domestic growth and thus demand for commodities,” Jack Chambers, interest rate strategist and economist at Australia and New Zealand Banking Group (ANZ), said in a morning note.

“The economic data released by China lacked any significant surprises… the majority of them were within expectations, thus trading has been fairly quiet and changes across the base metals complex have been minimal,” a base metals analyst told Fastmarkets.

Yet some releases relating to property investment in China could have a greater effect on copper prices.

NBS data showed property sales by floor area fell by 3.6% year on year in January-February, easing from the 0.9% rise in December 2018. New construction starts measured by floor area were similarly weaker with a 6% gain in the first two months of 2019, much lower than the previous 11.2% gain.

“The new construction starts data is weighing on copper prices,” a Shanghai-based copper analyst said, noting the red metal’s wide use in construction activities.

As a result, the most-traded May copper contract on the SHFE was down at 49,230 yuan per tonne at 10.46am Shanghai time, down by 0.2% or 110 yuan per tonne from Wednesday’s close.

The weakness in copper has been capped by a softer US currency of late, however.

The dollar index, at 96.60 as of 10.51am Shanghai time but up from a low of 96.38 on Wednesday, remains well below a multi-month peak of 97.72 reached on March 7. The dollar has come under pressure following some softer US economic data released overnight – see data section below for details – as well as a rally in sterling.

“The UK Parliament voted to reject any no-deal Brexit, setting up a vote tomorrow to extend the negotiating period with the EU from 29 March,” ANZ’s Chambers said. “Sterling rallied sharply in the lead-up to the parliamentary vote and extended these gains in the aftermath.”

Base metals prices

  • The SHFE May aluminum contract was up by 45 yuan per tonne to 13,650 yuan per tonne
  • The SHFE April lead contract dipped by 85 yuan per tonne to 17,365 yuan per tonne.
  • The SHFE May zinc contract inched down by 25 yuan per tonne to 21,850 yuan per tonne.
  • The SHFE May nickel contract was up by 540 yuan per tonne to 101,540 yuan per tonne.
  • The SHFE May tin contract price was up by 40 yuan per tonne to 147,410 yuan per tonne.

Currency moves and data releases

  • The dollar index was little changed at 96.60 as at 10:51am Shanghai time.
  • In equities, the Shanghai Composite was down by 1.09% to 2,994.06 as at 11.30am Shanghai time.
  • On Wednesday, UK members of parliament (MPs) rejected a no-deal Brexit (the process in which the UK will exit from the European Union), inflicting another heavy defeat on Prime Minister Theresa May. MPs will vote today on whether to extend the Brexit deadline.
  • In US data on Wednesday, orders for durable goods rose by 0.4% in January from the prior month, marking the third monthly increase and beating an expected 0.5% decline. Removing transport, the so-called core durable goods orders declined by 0.1% in January versus an expected 0.1% gain.
  • The producer price index (PPI) edged up by 0.1% in February on a seasonally adjusted basis but was below the forecast 0.2%. Construction spending in the US rose by 1.3% in January following two months of decline.
  • In European data on Thursday, French and German final consumer price indices are due.
  • US releases of note include import prices, unemployment claims and new home sales.

London Metal Exchange, base metals prices

Shanghai Futures Exchange, base metals prices

Changjiang spot prices, base metals prices