LIVE FUTURES REPORT 14/08: SHFE zinc price up 0.7% amid easing US-China trade tensions; Ni, Al weaken

Barring those for nickel and aluminium, base metals prices on the Shanghai Futures Exchange were up during morning trading on Wednesday on August 14, with signs of easing trade tensions between the United States and China buoying overall market sentiment.

US President Donald Trump unexpectedly announced on Tuesday a delay in the imposition of a further 10% tariff on a number of Chinese goods until December 15, fueling hopes for a trade deal between the two countries.

“The announcement followed as communications between the US and China opened up again, with Trump stating his administration had a very productive call with China and that he thinks Beijing wants to do something drastic on trade…,” Hayden Dimes, economist at ANZ Research, said in a morning note.

The developments were received positively by markets, shoring up market sentiment and resulting in general strength across riskier assets, including the base metals.

Benefitting from the positive backdrop and mirroring the strength witnessed on the London Metal Exchange on Tuesday, zinc was the biggest gainer of the SHFE base metals this morning.

The galvanizing metal’s most-traded October contract on the SHFE rose to 18,850 yuan ($2,671) per tonne, up by 125 yuan per tonne, or 0.7%, from Tuesday’s close of 18,725 yuan per tonne.

The rest of the complex, barring nickel and aluminium, also secured some marginal gains: October copper (+0.6%), September lead (+0.3%), September tin (+0.7%). The October aluminium and October nickel contracts fell by 0.4% and 1.3% respectively.

Zinc prices also benefitted from a positive fundamental backdrop.

The International Lead & Zinc Study Group (ILZSG) reported the total zinc deficit in the first five months of 2019 has ballooned to 123,000 tonnes, considerably higher than the previous year’s deficit of 103,000 tonnes.

“The deficit emerged despite a 0.6% decline in global consumption and continues to reflect supply-side challenges for zinc,” Fastmarkets research analyst Andy Farida said.

Other highlights

  • Nickel, retreating after its recent run of strength, gave the worst performance of its peers on the SHFE this morning. The metal’s most-traded October contract fell to 122,750 yuan per tonne as at 9.15am Shanghai time, down by 1,620 yuan per tonne from Tuesday’s close of 124,370 yuan per tonne.
  • The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was down by 0.05% at 97.75 as at 9.15am Shanghai time.
  • In European data on Tuesday, the United Kingdom’s July-August earnings index on a three-month moving average compared with the same period a year earlier was in line with expectations, increasing by 3.7%, while the country’s claimant count change in July-August fell to 28,000, from 31,400 previously.
  • In addition, the UK’s unemployment rate over the same period edged slightly higher to 3.9%, from 3.8% previously.
  • In US data on Tuesday, the country’s consumer price index (CPI) on a month-on-month basis for the July-August period was in line with expectations at 0.3%, while its core CPI over the same period was set at 0.3%, beating an expected level of 0.2%.
  • In data on Wednesday, year-to-date fixed asset investment in China recorded a year-on-year rise of 5.7%, lower than the forecast 5.9% and the previous 5.8%. The country’s industrial production growth slowed to 4.8% year on year in July, below the forecast 6.0% and the prior 6.3%.
  • Later, a raft of releases including German preliminary gross domestic product (GDP); UK CPI and producer price input; the European Union’s flash employment change, flash GDP and industrial production; and US import prices are of note.