LIVE FUTURES REPORT 16/07: SHFE base metals prices mostly little changed to weaker; Pb, Ni buck trend

Base metals prices on the Shanghai Futures Exchange were mostly little changed with a slight downward bias during morning trading on Tuesday July 16, with renewed dollar strength offsetting the positivity stemming from China’s better-than-expected economic data released on Monday.

The most-traded contracts for copper, aluminium, zinc and tin on the SHFE were down between 0.1% and 0.3% as at 9.31am Shanghai time. But lead and nickel gave stronger performances with gains of 0.8% and 0.7% respectively.

A firmer US currency overnight has exerted downward pressure on the base metals complex this morning.

The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was at 96.98 as of 9.31am Shanghai time on Tuesday, up from 96.83 at roughly the same time on Monday.

Adding to the less risk friendly environment were rising concerns over a lack of meaningful progress being made in trade talks between China and the United States despite the positive signals seen at the Group of 20 (G20) summit in Japan in late June.

“With no meaningful progress since trade talks were restarted at the G20 sideline meeting at the end of last month, markets will slowly begin to fear that the nightmare scenario of another tranche of US tariffs could be coming to China,” Edward Moya , senior market analyst from online trading services provider Oanda, said in a morning note.

The dollar strength and growing trade concerns have offset the positive effect of better-than-expected Chinese economic data on Monday.

China’s industrial production and retail sales were better than expected with year-on-year increases of 6.3% and 9.8% respectively in June, according to data from the country’s National Bureau of Statistics (NBS) on Monday.

Chinese fixed asset investment showed similar strength, growing by 5.8% year on year in the first half of the year, surpassing expected and previous growth of 5.6%.

Zinc, exhibiting the worst performance of its peers, was down to 19,170 yuan ($2,787) per tonne as at 9.31am Shanghai time, down by 50 yuan per tonne, or 0.3%, from Monday’s closing price of 19,220 yuan per tonne.

Zinc’s more pronounced price weakness comes amid signs of growing supply in China.

SHFE zinc stocks totaled 74,065 tonnes on July 12, down by 7,012 tonnes from the prior week but still up significantly from the 56,320 tonnes recorded on May 24.

Meanwhile, data from China’s NBS showed domestic refined zinc production in the country totaled 480,000 tonnes in May, up from 465,000 tonnes in April.

Other highlights

  • Lead was the outperformer of the SHFE complex with the metal’s most-traded August contract climbing to 16,170 yuan per tonne, up by 130 yuan per tonne from Monday’s closing price of 16,040 yuan per tonne.
  • In Chinese data on Monday, China’s GDP figure on a quarterly basis was slightly lower at 6.2%, down from 6.4% previously.
  • In US data on Monday, the Empire State Manufacturing Index for the June-July period was recorded at 4.3, beating an expected reading of 1.6 and up from -8.6 the prior month.
  • In data on Tuesday, a basket of data including the United Kingdom’s average earnings index, German ZEW economic sentiment, and US retail sales will be out.
  • Meanwhile, US Federal Reserve chairman Jerome Powell, Federal Open Market Committee members Charles Evans and Michelle Bowman and Bank of England governor Mark Carney are due to speak.