LIVE FUTURES REPORT 16/07: Most SHFE base metals prices correct; zinc outperforms

With the exception of nickel and aluminum, base metals prices on the Shanghai Futures Exchange staged a modest recovery during Asian morning trading on Monday July 16, with the market continuing to adjust to trade tensions between China and the United States.

The slightly firmer tone across the SHFE base metals complex comes after prices fell at the end of last week amid an escalation in the trade spat between China and the US, with former threatening impose fresh tariffs on $200 billion worth of Chinese goods.

But a lack of an immediate response from China to the latest US tariffs has provided markets with a much needed breather, allowing base metals prices to recover.

“SHFE base metals prices are correcting after last Friday’s falls, which were due to trade war headlines. A price correction is well within expectations,” a Shanghai-based analyst said.

Zinc led the gains with the metal’s most-traded contract on the SHFE rising to 20,975 yuan ($3,135) per tonne as at 9.27am Shanghai time, up by 380 yuan per tonne or 1.9% from last Friday’s close.

“Robust downstream demand for zinc has supported the rebound in this metal amid an open import window [in China],” the analyst added.

Zinc stocks at Shanghai-bonded warehouses stood at 156,000-161,000 tonnes at the end of June, down from 207,000-209,000 tonnes a month earlier, with participants actively looking to bring the metal into China to sell at a profit.

Lead was the second-best performer on the SHFE in the early session on Monday, with the metal’s most-traded August contract up by 1.8% as at 9.27am Shanghai time.

“Lead’s fundamentals remain price supportive, with falling global inventory, record low treatment charges – which suggest a tight concentrate market – and a supply deficit in the first quarter of 2018 to boot,” Metal Bulletin analyst Andy Farida said.

Base metals prices

  • The SHFE September copper contract was up by 560 yuan per tonne to 49,280 yuan per tonne.
  • The SHFE September aluminium contract edged down by 10 yuan per tonne to 14,030 yuan per tonne.
  • The SHFE August lead contract increased by 335 yuan per tonne to 19,270 yuan per tonne.
  • The SHFE September nickel contract fell by 470 yuan per tonne to 111,970 yuan per tonne.
  • The SHFE September tin contract edged up by 140 yuan per tonne to 145,240 yuan per tonne.

Currency moves and data releases

  • The dollar index rose by 0.04% to 94.74 at 9.53am Shanghai time.
  • In other commodities, the Brent crude oil spot price increased 0.03% to $74.84 per barrel as of 9.53am Shanghai.
  • In equities, the Shanghai Composite edged down 0.56% to 2,815.35 as of 9.55am Shanghai time.
  • In US data last Friday, the preliminary University of Michigan (UoM) consumer sentiment index came in at 97.1, falling 1.1 percentage points from the previous figure and 1.2 percentage points short of the forecast figure.
  • Meanwhile, revised UoM inflation expectations were recorded at 2.9%, down 0.1% from the previous level, while US import prices month on month came in 0.4% lower – the biggest drop in over two years – against a 0.9% rise previously.
  • In data today, Chinese data already out showed the country’s second-quarter gross domestic product (GDP) grew 6.7% from a year earlier, slightly lower than the 6.8% increase in the first quarter, but in line with expectations.
  • China’s fixed asset investment grew 6% year on year in the first half of 2018, flat with the forecast print, while industrial output for June matched the slowest growth rate in two years at 6% – down from 6.8% previously.
  • Chinese retail sales were slightly better than expected with a 9% year-on-year increase in June, accelerating from the 8.5% rise seen in May.
  • Later, we have US core and headline retail sales for June and the Empire State Manufacturing Index of note.