LIVE FUTURES REPORT 16/04: Escalation in geopolitical tensions pressures SHFE base metals prices; aluminium most resilient

An escalation in geopolitical tensions over the weekend dampened sentiment during Asian morning trading on Monday April 16 with the base metals traded on the Shanghai Futures Exchange broadly down.

Aluminium showed the most resilience during the early session in Asia, with participants continuing to focus on the United States’ sanctions on aluminium producer UC Rusal and how the potential loss of supply from the Russian company might affect the global market.

The most-traded June aluminum contract on the SHFE traded at 14,575 yuan ($2,323) per tonne as of 11.14 am Shanghai time, down by 5 yuan from Friday’s close.

“Traders remain on edge as the as the impact of the sanctions continues to play out,” ANZ Research noted on Monday.

“Cancelled warrants – orders to remove metal from [London Metal Exchange] warehouses – rose by 35% to 370,000 tonnes on Friday as panic buying continued,” it added.

On Friday, Rio Tinto said it was declaring force majeure on some of its contracts after reviewing its arrangements with Rusal in light of US sanctions on the Russian aluminium producer.

The rest of the complex was lower, driven mainly by heightened geopolitical tensions following a US-led missile strike in Syria last Friday, but losses have been fairly limited.

The strikes, carried out in conjunction with the United Kingdom and France, were intended to serve as a deterrent against chemical weapons.

The airstrikes on Friday “have thus far drawn only verbal condemnation from Russia… with Russia’s prediction of ‘global chaos’ if the West hits Syria again not filling markets with fresh dread, at least judging from the limited foreign exchange market movements evident in the first two hours of the new trading week,” Ray Attrill, head of foreign exchange strategy at National Australia Bank, said on Monday.

Meanwhile, tensions related to a trade spat between the US and China, the world’s two largest economies, appeared to fade after dominating headlines in recent weeks.

“There is some evidence that both sides have somewhat backed down slightly after [Chinese President] Xi [Jinping] championed free trade at Boao Forum and Trump expressed optimism that a trade deal might eventually be agreed,” Zhu Huani, an economist at Mizuho Bank, said.

Base metals prices

  • The SHFE June copper contract fell 140 yuan to 50,380 yuan per tonne.
  • The SHFE June lead contract retreated 165 yuan to 17,995 yuan per tonne.
  • The SHFE May tin contract dropped 210 yuan to 142,920 yuan per tonne.
  • The SHFE July nickel contract slipped 60 yuan to 103,700 yuan per tonne.
  • The SHFE June zinc contract fell 35 yuan to 23,480 yuan per tonne.

Currency moves and data releases

  • The dollar index was down by 0.08% at 89.73 as of 11.23am Shanghai time.
  • In other commodities, the Brent crude oil spot price down by 1.04% to $71.79 per barrel as of 11.23 am Shanghai.
  • In equities, the Shanghai Composite was down by 1.5% to 3111.65 as of 11.23am Shanghai time.
  • In US data today, we have headline and core retail sales, Empire State Manufacturing Index, business inventories and the NAHB Housing Market Index.
  • In addition, US Federal Open Market Committee member Raphael Bostic is speaking.

LME snapshot at 3.23am London time
Latest three-month LME Prices
  Price ($ per tonne) Change since previous session’s close ($)
Copper 6,820 -10
Aluminium 2,287 1.5
Lead 2,319 16
Zinc 3,095 -22
Tin 20,980 -70
Nickel 13,920 -20
SHFE snapshot at 11.23am Shanghai time
Most-traded SHFE contracts
  Price (yuan per tonne) Change since previous session’s close (yuan)
Copper (June) 50,380 -140
Aluminium (June) 14,575 -5
Zinc (June) 23,480 -35
Lead (June) 17,995 -165
Tin  (May) 142,920 -210
Nickel  (July) 103,700 -60
Changjiang spot snapshot on April 16
  Range (yuan per tonne) Change (yuan)
Copper  50,550-50,610 -120
Aluminium 14,440-14,480 270
Zinc 23,800-23,900 -50
Lead 18,300-18,450 -175
Tin  143,000,144,500 250
Nickel  103100-103,600 1,850
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