LIVE FUTURES REPORT 15/03: SHFE base metals prices broadly down; China to implement VAT cut on April 1

Speaking to reporters at the close of the annual meeting of the National People’s Congress in Beijing on Friday morning, Chinese Premier Li Keqiang said that the VAT rate for the manufacturing sector will be cut to 13% from 16% at the beginning of next month.

The news came somewhat as a surprise to market participants, who had been expecting the new rate to come into effect from May 1 instead.

“The market widely believed that VAT will be lowered in May, but it has come earlier than expected,” a copper trader based in Beijing told Fastmarkets.

“Base metals prices on the SHFE have a VAT rate [of 16%] already priced in so after it was announced that the VAT cut would come sooner than expected, SHFE base metals prices have came under pressure,” a Shanghai-based copper trader said.

A delivery of 32,550 tonnes of the red metal into London Metal Exchange warehouses in Rotterdam on Thursday was a further headwind for copper prices. The delivery caused the backwardation in the exchange’s cash/three-month copper spread to narrow to $16 per tonne from $29 per tonne.

Meanwhile, price-supportive upstream news could only cap the red metal’s losses this morning.

“Traders shrugged off news that copper miner Codelco won’t restart two smelters this month as promised. Tough new environmental regulations have forced it to close the Chuquicamata and Salvador operations until they are upgraded,” Jack Chambers, interest rate strategist and economist at Australia and New Zealand Banking Group (ANZ), said in a morning note.

“The market has known about Chuqicamata’s unstable operations since the end of last year. From a fundamental perspective, it is not fresh news,” a Shanghai-based copper analyst said.

The most-traded May copper contract on the SHFE stood at 49,060 yuan ($7,299) per tonne, down by 50 yuan per tonne or 0.1% from Thursday’s close of 49,010 yuan per tonne.

Base metals prices

• The SHFE May aluminum contract was up by 25 yuan per tonne to 13,675 yuan per tonne
• The SHFE April lead contract dipped by 45 yuan per tonne to 17,280 yuan per tonne.
• The SHFE May zinc contract rose by 100 yuan per tonne to 22,030 yuan per tonne.
• The SHFE May nickel contract was down by 350 yuan per tonne to 101,140 yuan per tonne.
• The SHFE May tin contract price fell by 560 yuan per tonne to 147,050 yuan per tonne.

Currency moves and data releases

• The dollar index was little changed from the previous day’s close at 96.65 as at 11:49 am Shanghai time, though is up slightly from 96.60 at a similar time on Thursday.
• In equities, the Shanghai Composite was up by 1.54% to 3,036.76 as at 11.30am Shanghai time.
• In US data on Thursday, new home sales fell more than expected with a 6.9% month-on-month drop to 607,000 units in January – the weakest reading since October 2018.
• Data highlights for Friday include the European Union’s consumer price index and the Empire State manufacturing index, capacity utilization rate and industrial production from the United States.