LIVE FUTURES REPORT 16/03: Expectation of tighter supply buoys SHFE zinc prices; other metals broadly lower

The base metals traded on the Shanghai Futures Exchange were broadly lower during Asian morning trading on Friday March 16. Zinc and sister metal lead bucked the general weakness, however, albeit with marginal gains.

With participants seemingly staying cautious ahead of key events and releases next week, most base metals prices have pushed lower this morning.

“We think markets are in wait-and-see mode and will remain that way for the balance of the week. A number of developments head our way next week, including the Federal Reserve rate decision on Wednesday and a possible $60 billion trade levy that the White House could impose on the Chinese,” Ed Meir, INTL FCStone analyst said.

“The tariff issue is now front and center in terms of market concern and is largely responsible for the lower trend we have been seeing in a number of commodity markets,” he added.

Zinc and lead prices have shown more resilience this morning, with the latter’s prices edging higher on the back of expectations for supply to tighten in the near term.

The most-traded May zinc contract on the SHFE increased to 24,895 yuan ($3,938) per tonne as of 10.02am Shanghai time, up by 35 yuan or 0.1% from Thursday’s closing price of 24,860 yuan per tonne.

Shrinking profit margins due to low treatment charges for zinc concentrates may cause Chinese smelters to lower their operating rates, according to China’s Galaxy Futures.

Furthermore, Chinese smelters typically begin planned maintenance at the end of March, so there is an expectation for the supply of refined zinc metal to tighten over the next few weeks, it added.

Zinc’s sister metal lead also gained during today’s early session – the heavy metal has been supported by declining stocks on the London Metal Exchange and subsequent price increases there.

The SHFE May lead contract price rose by 60 yuan or 0.3% to 18,520 yuan per tonne.

Concerns over additional supply pressure Ali prices

  • The SHFE May aluminium contract dipped by 20 yuan or 0.1% to 13,975 yuan per tonne.
  • “Aluminium edged lower on the specter of more Chinese supply hitting the market. With the end of winter-induced production restrictions in sight, traders are raising concerns about the additional metal this could bring to the market,” ANZ Research noted on Friday.
  • “The winter capacity cuts ended on March 15 and the market is waiting to hear what the government will do to cut further capacity and help with consumption in the domestic aluminium industry,” a Shanghai-based trader said.

Rest of metals decline

  • The SHFE May copper contract price decreased 230 yuan or 0.4% to 51,890 yuan per tonne.
  • The SHFE July nickel contract fell by 910 yuan or 0.9% to 102,910 yuan per tonne.
  • The SHFE May tin contract price decreased 470 yuan or 0.3% to 144,440 yuan per tonne.

Currency moves and data releases

  • The dollar index was down by 0.04% at 90.1 as of 10.39am Shanghai time.
  • In other commodities, the Brent crude oil spot price fell by 0.08% to $64.99 per barrel as of 11.04am Shanghai time.
  • In equities, the Shanghai Composite edged up by 0.11% to 3,294.67 as of 10.40am Shanghai time.
  • In US data on Thursday, the Empire State Manufacturing Index was at 22.5, above the forecast of 14.9, and unemployment claims stood at 226,000, just below expectations of 227,000.
  • On today’s economic agenda, we have the headline and core consumer price index (CPI) readings from the European Union as well as the CB leading index from the United Kingdom.
  • A host of US data including building permits, housing starts, capacity utilization rate, industrial production, preliminary University of Michigan consumer sentiment and inflation expectations and Jolts job openings is also due.

LME snapshot at 02.02am London time
Latest three-month LME Prices
Price ($ per tonne)  Change since yesterday’s close ($)
Copper 6,908 -12
Aluminium 2,087 2
Lead 2,401 -9
Zinc 3,227 -8
Tin 20,990 -35
Nickel 13,585 -45

SHFE snapshot at 10.02am Shanghai time
Most-traded SHFE contracts
Price (yuan per tonne)  Change since yesterday’s close (yuan)
Copper (May) 51,890 -230
Aluminium (May) 13,975 -20
Zinc (May) 24,895 35
Lead (May) 18,520 60
Tin (May) 144,440 -470
Nickel (July) 102,910 -910

Changjiang spot snapshot on March 16
Range (yuan per tonne)  Change (yuan)
Copper  51,430-51,450 -430
Aluminium 13,730-13,770 0
Zinc 24,830-25,630 70
Lead 18,600-18,800 50
Tin  144,000-145,500 0
Nickel  102,100-102,500 -1,000