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Copper, aluminum, lead and zinc prices recorded slight losses in early trading on Thursday, while nickel and tin exhibited more significant weakness with both declining by 0.6%.
The dollar continues to hold above the psychological level of 96, with the firm US currency of late becoming a drag on base metals prices.
The dollar index stood at 96.07 as at 10.02am Shanghai time on Thursday, little changed from roughly the same time on Wednesday, but up significantly from a low of 95.03 on January 10.
Adding to this morning’s negative tone across the SHFE base metals was a greater degree of caution among investors amid worries of a likely increase in US-China tensions after The Wall Street Journal reported that the US Justice Department is pursuing a criminal case against Chinese tech firm Huawei Technologies Co for allegedly stealing trade secrets from US business partners.
Huawei could face an indictment soon, according to the report.
The news stoked fears of a ratcheting up in tensions between China and the United States, with participants opting for a more cautious approach to trading this morning.
The US Federal Reserve released its Beige Book on economic conditions on Wednesday, saying the overall economic outlook remains positive. In addition, concerns about the eurozone economy after the UK parliament rejected Prime Minister Theresa May’s plan for the United Kingdom’s exit from the European Union (in the process known as Brexit) suppressed the British pound and supported the dollar’s upward movement.
In nickel, weakened demand from the Chinese stainless steel industry after mills had completed restocking the metal to cover their needs over the coming Chinese New Year holidays on February 4-10.
“The nickel price will enter a period of correction as the price right now is very higher. The buying capacity from stainless steel refineries is weaker as many have already stockpiled enough material. And [there is] no big news on demand side to support the price,” a nickel analyst on Shanghai.
The most-traded May nickel contract on the SHFE stood at 93,230 yuan ($13,785) per tonne as at 10.04 am Shanghai time, down 570 yuan per tonne from Wednesday’s close. The price remains near November 2018 highs.
Base metals prices
Currency moves and data releases