LIVE FUTURES REPORT 17/08: SHFE base metals prices rebound on resumption of US-China trade talks

The base metals complex recouped some of the ground it lost over the week after the US announced it is restarting negotiations with China after a two-month impasse and escalating tit-for-tat tariffs that kept the market teetering on the edge of a possible full-on trade war.

“Market participants see such a gesture as a positive move to benefit both nations, following from a successful conciliatory EU-US trade deal in July,” Metal Bulletin analyst Andy Farida said.

China is expected to send a delegation to the US led by Vice Commerce Minister Wang Shouwen in late August. Although market participants remain skeptical about how this low-level trade discussion could diffuse rising tensions between the two countries, this small progress helped spark some investor appetite.

Providing further support to the base metals this morning was a slightly weakening of the dollar; the dollar index was recently at 96.60 on Friday morning, still in relatively high ground but down from a peak of 96.99 reached on Wednesday.

Nickel demonstrated the biggest improvement with its most-traded October contract up by 1.4%. Farida noted that the steady drawdown in global stocks from both the London Metal Exchange- and SHFE-approved warehouses are bullish elements that are helping support the market.

“There is less idle metal around while global underlying demand for nickel remains fairly strong in 2018,” he added.

Zinc, which fell the most on Thursday, rebounded this morning with its most-traded October contract rising by 0.9%.

Copper followed closely with its most-traded October contract bouncing 0.7% as the market downplayed the bearish impact of improved negotiations between BHP and Escondida mine workers that has dogged the red metal this week.

Aluminium was up the least this morning, with its most-traded October contract ticking up by 0.2%.
According to Farida, the underlying fundamentals for this metal remain supportive; Metal Bulletin Research expects the global aluminium market to record a deficit of 713,000 tonnes this year.

Base metals prices

• The SHFE November nickel contract was up 1,570 yuan ($228) per tonne to 110,720 yuan per tonne.
• The SHFE October zinc contract rose 185 yuan per tonne to 20,045 yuan per tonne.
• The SHFE October lead contract increased 55 yuan per tonne to 17,560 yuan per tonne.
• The SHFE September tin contract was up 530 yuan per tonne to 143,260 yuan per tonne.
• The SHFE October copper contract climbed up by 330 yuan per tonne to 47,910 yuan per tonne.
• The SHFE October aluminium contract ticked up by 35 yuan per tonne to 14,475 yuan per tonne.

Currency moves and data releases

• The dollar index was stable at 96.60 as at 9.01am Shanghai time.
• In other commodities, the Brent crude oil spot price was steady at $71.36 per barrel as at 9.01 am Shanghai time.
• In equities, the Shanghai Composite fell 0.15% to 2,701.29 as at 10.49am Shanghai time.
• In data Thursday, the EU’s trade surplus fell to €16.7 billion ($19 billion) from €16.9 billion previously, missing the forecast for an increase to €17 billion.
• In US data, housing starts stood at 1.17 million, below the forecast of 1.27 million. Building permits were in line at 1.31 million, while weekly unemployment claims stood at 212,000.
• In US data today, we have the Conference Board leading index results and preliminary data on the University of Michigan’s consumer sentiment survey.
• In Europe, the European Union is releasing data on its current account as well as data on its final consumer price index.