LIVE FUTURES REPORT 17/06: SHFE base metals broadly down amid weaker Chinese economic data; Ni supported

With the exception of nickel and tin that were little changed, base metals prices on the Shanghai Futures Exchange were all down during morning trading on Monday June 17 following the release of disappointing Chinese data at the end of last week.

Tin was unchanged, nickel edged up by 0.1% while the rest weakened: copper (-0.5%), aluminium (-0.7%), lead (-0.7%) and zinc (-0.5%).

The broadly weak showing by the base metals follows data last Friday that showed China’s fixed asset investment for January-May rose by 5.6% on an annual basis, lower than the expected rise of 6.1%. Meanwhile, the country’s industrial production rose by 5% year on year in May, falling short of the forecast 5.4% increase and marking the slowest growth in 17 years.

The latter release was the latest signal of slowing demand in the world’s second-largest economy amid its ongoing trade war with the United States.

As a result, market sentiment and investors’ appetite for risk have deteriorated, leaving base metals prices on the SHFE under downward pressure.

This was sufficient enough to offset any positivity stemming from developing supply issues in the copper market, with the red metal’s most-traded August contract sliding to 46,120 yuan ($6,659) per tonne as at 10.50am Shanghai time, down by 220 yuan per tonne from Friday’s close of 46,340 yuan per tonne.

“Supply issues failed to ignite copper prices. Workers at Chilean copper producer Codelco’s Chuquicamata operation downed tools and began strike action on Friday. The operation produces around 2% of global supply, thus exacerbating an already tight market,” Kishti Sen, an analyst at ANZ Research, said in a morning note.

“The strike at the mine will reduce [Codelco’s] production of copper concentrate and if the company means to ramp up its smelting production as planned, it will need to agree to a deal soon, so the strike is expected to have limited impact,” a Shanghai-based analyst said.

Other highlights

  • Nickel was the lone metal in positive territory this morning, with the metal’s most-traded July contract up by 70 yuan per tonne at 100,130 yuan per tonne from a close of 100,060 yuan per tonne on Friday.
  • Nickel prices continue to be supported by news that widespread flooding across the Indonesian island of Sulawesi - the country’s main nickel ore production region – has disrupted some mining operations in the region. Though smelters are said to be operating normally at present.
  • The dollar index was down by 0.02% at 97.49 as at 11.31 am Shanghai time.
  • The Shanghai Composite Index was down by 1.72% at 2,880.26 as at 11.30 am Shanghai time.
  • In US data on Friday, retail sales increased by 0.5% month on month in May, in line with analysts’ forecasts. Industrial production rose by more than expected with a 0.4% seasonally adjusted gain in May from the prior month’s 0.4% decline.
  • The University of Michigan’s preliminary reading of consumer sentiment dropped to 97.7 in June from 100 in May.
  • It is a light day for data on Monday with the Empire State Manufacturing Index from the US and a speech by European Central Bank president Mario Draghi of note.
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