LIVE FUTURES REPORT 15/08: Weak Chinese economic data weighs on SHFE base metals prices

Data released on Tuesday showed China’s fixed-asset investment growth slowed to 5.5% in the first seven months of the year, compared with an expected print of 6.0%. The country’s industrial production in July was flat with the previous month at 6.0%, but down from the 6.3% forecast. Chinese retails sales last month were also lower than expected at 8.8% compared to June’s 9.0% and the July forecast of 9.0%. The July unemployment rate rose to 5.1% compared with 4.8% in June.

The weaker-than-expected data out of China follows a collapse in the Turkish lira against the dollar which fueled currency volatility and further rattled the already tenuous market sentiment.

Although the Turkish currency has recovered and was seen trading at 6.56 against the dollar on Wednesday morning, compared with 6.87 to $1 on Tuesday according to Oanda.com, Metal Bulletin analyst Andy Farida noted that “overall buying sentiment in the base metals complex remains fragile while metal prices continue to hover near 2018 lows.”

“The lack of dip-buying momentum is fueled by the poor Chinese economic data while the limited downside pressure is kept in check by a stabilized currency market,” he added.

Copper fell the most this morning, with its most-traded October contract on the SHFE dropping 1.2% from its closing price on Tuesday.

This morning’s weakness comes on the back of news that BHP and the worker’s union at the world’s largest copper mine by production, Escondida, have agreed to resume negotiations – delaying a strike that was expected to start on Tuesday and easing concerns of supply disruptions.

“The union said that both sides had made enough headway on issues that had stalled negotiations that they gave themselves another day to resolve the remaining points. The easing concerns of supply disruptions permeated through the rest of the sector,” ANZ Research noted on Wednesday.

Zinc, which gave the worst performance on Tuesday, showed a slight decrease in the early session on Wednesday with a fall of 0.4% in its most-traded October contract on the SHFE.

Persistent dollar strength continues to pressure the SHFE base metals complex as a whole, with the US currency trading at 96.76 as at 9am Shanghai time on Wednesday, near the high of 96.80 reached on Tuesday, which was a fresh 2018 high.

Base metals prices

• The SHFE November nickel contract was down 340 yuan per tonne to 111,640 yuan per tonne.
• The SHFE October zinc contract fell 90 yuan per tonne to 20,730 yuan per tonne.
• The SHFE September lead contract dipped 145 yuan per tonne to 18,220 yuan per tonne.
• The SHFE September tin contract was down 890 yuan per tonne to 144,190 yuan per tonne.
• The SHFE October copper contract fell 610 yuan per tonne to 48,910 yuan per tonne.
• The SHFE October aluminium contract dropped 70 yuan per tonne to 14,630 yuan per tonne.

Currency moves and data releases

• The dollar index was up 0.11% at 96.75 as at 9am Shanghai time.
• In other commodities, the Brent crude oil spot price was down by 0.12% at $72.08 per barrel as at 9am Shanghai time.
• In equities, the Shanghai Composite fell 0.74% to 2,760.26 as at 10.24am Shanghai time.
• In data today, we have US industrial production, capacity utilization rate and retail sales.
• In European data, the UK is set to release data on its consumer price index, producer price index and retail price index.