LIVE FUTURES REPORT 17/05: SHFE base metals prices mixed amid simmering US-China trade tensions; tin slides 0.7%

Base metals prices on the Shanghai Futures Exchange were mixed during morning trading on Friday May 17, after positive US data releases overnight could offer only some respite from the continuing US-China trade war.

Against such a mixed backdrop, the SHFE base metals exhibited similarly mixed moves on Friday morning; copper, aluminium and nickel managed to secured marginal gains, while zinc, lead and tin prices fell.

“Positive economic data supported sentiment,” Jack Chambers, an analyst at Australia and New Zealand Banking Group (ANZ), said in a morning note.

US new home construction rose for the second month in a row, while permits - a proxy for future construction - also rose. See other highlights below for more detail.

“The gains were limited, though, as trade tension simmered in the background,” Chambers said.

US President Donald Trump’s move on Wednesday to ban American telecommunications firms from using technology supplied by China’s Huawei or its subsidiaries and the US Commerce Department’s subsequent decision to place Huawei on its so-called “Entity List” did little to allay fears that US-China trade talks could collapse.

The placing of Huawei on the “Entity List” restricts the Chinese telecom giant from buying parts and components from US companies without the approval of the US government, making it difficult for Huawei to sell some of its products due to its reliance on US suppliers.

The moves were seen as a further ratcheting up of tensions between China and the United States, with sentiment deteriorating across commodity markets as a result.

Tin gave the worst performance of its peers with the most-traded September contract declining to 145,530 yuan ($21,146) per tonne as at 9.46am Shanghai time, down by 1,060 yuan per tonne or 0.7% from Thursday’s close of 146,950 yuan per tonne.

Tin’s more pronounced weakness relative to the rest of the SHFE base metals follows a decline in the London Metal Exchange’s three-month price on Thursday after deliveries of more than 440 tonnes of the metal made their way into Asia, European and North American warehouses.

“Tin prices look to stay negative over the next month or so due to the combination of a challenging macro (on trade tensions), the weak demand environment (evident in soft premiums), and expectations for stronger supply (from Indonesia),” Fastmarkets MB analyst Boris Mikanikrezai said.

Other highlights

  • While the dollar index was little changed at 97.83 as at 9.46am Shanghai time, the index remains well below a recent high of 98.35 on April 23 – its highest since June 2017.
  • The Shanghai Composite Index fell by 0.63% to 2,936.87.74 as at 10.23 am Shanghai time.
  • In US data on Thursday, building permits was at 1.3 million, higher than the forecast of 1.29 million while the Philly Fed Manufacturing Index was at 16.6, higher than estimates of 10.
  • Housing starts in the US was at 1.24 million, higher than the expected 1.21 million while unemployment claims was at 212,000, lower than the expected 220,000.
  • On the economic agenda for Friday, Japan will release its tertiary industry activity statistics while Europe will publish its core and headline consumer price indices.
  • In US data, the University of Michigan will release its preliminary consumer sentiment and inflation expectations, the Conference Board’s leading index is due and US Federal Open Market Committee member Richard Clarida is speaking.
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