LIVE FUTURES REPORT 17/07: SHFE copper, aluminium prices find support; other metals trend downward

Copper and aluminium prices on the Shanghai Futures Exchange were up during Asian morning trading on Tuesday July 17, with the former finding support from potential supply-side disruptions, while the light metal benefited from supply concerns surrounding the sanctions on Russian aluminium producer UC Rusal.

The rest of the complex was down in the early session on Tuesday, with disappointing Chinese economic data released on Monday and persistent concerns over global trade tensions denting sentiment in the base metals sector.

China’s gross domestic product reading for the second quarter came in 0.1% lower than the prior quarter, with the slowdown in Chinese economy stoking fears of reduced metal demand.

Copper bucked the general weakness, however, with the red metal benefiting from concerns over potential supply disruptions stemming from ongoing labor negotiations at the world’s largest copper mine, Escondida.

The most-traded September copper contract on the SHFE traded at 49,040 yuan ($7,331) per tonne as at 11.22am Shanghai time, rising 320 yuan per tonne or 0.7% from Monday’s close.

“Copper has been holding up relatively well, as the possibility of supply disruption in Chile was back in the headlines,” ANZ Research noted on Tuesday.

“Months of labor negotiations between union workers and BHP’s management at Chile’s Escondida copper mine has failed to reach an amicable agreement and the possibility of an all-out strike looms,” Metal Bulletin analyst Andy Farida said.

BHP’s latest offer was rejected as it excludes two of the miners’ main demands: a 5% salary increase and a one-time bonus equivalent to a 4% dividends distributed to shareholders.

“A strike at Escondida could well be the catalyst needed for the LME copper price to recover,” Farida added.

Moreover, discussions continue at the Mount Polley copper mine in Canada in attempt to resolve a near two-month strike.

Aluminium was similarly higher this morning, with its most-traded September on the SHFE trading at 14,075 yuan per tonne as at 11.22am Shanghai time, up 75 yuan per tonne from Monday’s close.

Ongoing trade disruptions due to the United States’ sanctions on Rusal and tariffs on Russian metal continue to support light metal prices, according to ANZ Research.

Base metals prices

  • The SHFE September zinc contract declined 130 yuan per tonne to 20,215 yuan per tonne.
  • The SHFE August lead contract fell by 225 yuan per tonne to 18,780 yuan per tonne.
  • The SHFE September tin contract plunged 1,020 yuan per tonne to 143,930 yuan per tonne.
  • The SHFE September nickel contract slid 480 yuan per tonne to 109,730 yuan per tonne.

Currency moves and data releases

  • The dollar index was little changed at 94.51 as at 11.22am Shanghai time.
  • In other commodities, the Brent crude oil spot price rose 0.51% to $72.16 per barrel as of 11.22 am Shanghai.
  • In equities, the Shanghai Composite plunged 1.01% to 2,785.75 as of 12.38pm Shanghai time.
  • In US data on Monday, the core retail sales reading for June came in as expected with a 0.4% gain, while the headline reading ticked up by 0.5%, surpassing a forecast increase of 0.4%. The Empire State manufacturing index fell 2.4 percentage points in July to 22.6, but was well above an expected print of 20.3.
  • In data today, we have UK employment releases including average earnings index, claimant count change and the unemployment rate. US data includes capacity utilization rate and industrial production.
  • In addition, US Federal Reserve chair Jerome Powell is speaking before the Senate Banking Committee in Washington DC.