LIVE FUTURES REPORT 17/04: SHFE zinc price drops 1.3%, healthy China data fails to provide support

Zinc prices on the Shanghai Futures Exchange were down again during morning trading on Wednesday April 17, following further inflows of the metal into London Metal Exchange sheds on Tuesday.

This morning’s weakness on the SHFE mirrors that seen on the LME on Tuesday, with the LME’s three-month zinc price down by more than 3% at the close of trading after more than 14,000 tonnes flowed into LME-listed warehouses in Europe this week.

The most-traded June zinc contract on the SHFE stood at 21,815 yuan ($3,251) per tonne as at 11.17am Shanghai time, down by 280 yuan per tonne or 1.3% from Tuesday’s close of 22,095 yuan per tonne.

“Zinc was under pressure for the second day in a row after another surge in inventories on the LME. Zinc held in LME warehouses have risen 30% this month. However, they remain low, down 72% from this time last year at 66,475 tonnes,” Kishti Sen, research analyst at Australia and New Zealand Banking Group (ANZ), said in a morning note.

Positive data out of China this morning has done little to offset zinc’s losses.

China’s economy grew by 6.4% year on year in the first quarter of 2019, above expectations for an increase of 6.3% and steady with the prior quarter, according to official data released on Wednesday.

In other releases, industrial production jumped by 8.5% year on year in March, surging past the expected 5.9% increase. Retail sales for March were similarly strong, up by 8.7% year on year and surpassing the forecast 8.4% growth.

Meanwhile, Chinese fixed asset investment in the first quarter was in line with expectations with a 6.3% year-on-year increase.

Investors have been keeping a close eye on the health of the Chinese economy – the world’s second largest – amid the country’s ongoing trade spat with the United States.

Yet despite the positive indicators, investors have been hesitate to get overly bullish and start buying again, perhaps waiting for further trade developments. As a result, most of the other base metals traded on the SHFE were little changed to down on Wednesday.

Aluminium was the standout performer, however, with the metal’s most-traded May contract climbing by 95 yuan per tonne or 0.7% to 13,965 yuan per tonne.

Other highlights

– The dollar index was little changed at 96.96 as at 11.18am Shanghai time.
– The Shanghai Composite was up by 0.16% to 3253.76 as at 11.40am Shanghai time.
– In data on Tuesday, the UK’s average earnings index for the March period, measured on a three-month moving average compared to the same period a year earlier, was stable at 3.5%. Similarly, the UK’s unemployment rate over the same period was unchanged at 3.9%
– In US data on Tuesday, the capacity utilization rate stood at 78.8%, below the 79.2% forecast and the NAHB housing market index was in line with estimates at 63.
– In European data on Wednesday, the UK’s consumer price index (CPI) producer price index (PPI) and retail price index (RPI) as well as the European Union’s CPI and trade balance are due.
– The trade balance and crude oil inventories from the US are also scheduled for Wednesday.