LIVE FUTURES REPORT 17/10: SHFE copper prices surge on increasing optimism; rising stocks weigh on aluminium

The most-traded December copper contract on the SHFE traded at 55,430 yuan ($8,410) per tonne as of 03:17 BST, up by 2,020 yuan from Monday’s close. Around 250,000 lots of the contract have changed hands so far, with open interest for contract at around 215,000 positions.

Increasing optimism in the market following a better-than-expected print for China’s September producer price index (PPI) and expectations that the country’s third-quarter gross domestic product (GDP) reading is set to exceed previous estimates has seen red metal prices surge this morning.

The Chinese PPI for September at 6.9% was up from 6.3% previously, also beating the previous forecast of 6.4%.

“The better-than-expected producer prices in China on Monday boosted optimism in the market that the domestic demand in China will remain strong,” ANZ Research said.

“The market is also expecting a relatively positive backdrop to emerge from the China’s Communist Party congress meeting this week. While the focus will be on the political side, any comments around the supply-side reform will be keenly watched,” it added.

This morning’s strength follows a rally in the London Metal Exchange’s three-month copper price on Monday, which saw the contract close $178 higher at $7,060 per tonne.

“[Monday’s] move was partly triggered by increasing optimism about the economic outlook in China, this after the country’s central bank governor said over the weekend that the economy could grow by 7% during the second half of this year, defying widespread expectations for a second-half slowdown,” INTL FCStone analyst Edward Meir said.

Rising stocks, weak capacity cuts weigh on aluminium

• The SHFE’s most-traded December contract dropped 350 yuan to 16,320 yuan per tonne.
• “Aluminium stocks have risen continuously in recent weeks, which has put a lot of pressure on prices,” China’s Citic Futures Research noted.
• SHFE aluminium stocks rose 19,295 tonnes or 3.4% to 582,206 tonnes in the week ended on October 13.
• Meanwhile, weaker-than-expected winter cuts in China have also wavered the market’s bullish sentiment towards the light metal price in the short term.
• On October 13, Binzhou city in the Chinese province of Shandong announced that it will halt a further 1.6 million tpy of aluminium capacity from November 15 to March 15. However, the amount scheduled to be cut was lower than market expectations.

Other base metals higher; zinc bucks the trend

• The SHFE December zinc contract price fell 565 yuan to 25,710 yuan per tonne.
• The SHFE December lead contract price rose 40 yuan to 20,310 yuan per tonne.
• The SHFE January nickel contract price rallied 2,310 yuan to 94,600 yuan per tonne
• The SHFE January tin contract price edged up 160 yuan to 147,080 yuan per tonne.

Currency moves and data releases

• The US dollar index was up 0.08% at 93.37 as of 03:18 BST.
• In other commodities, the Brent crude oil spot price dropped 0.15% to $57.8 per barrel while the Texas light sweet crude oil spot price was down 0.14% to $51.77
• In equities, the Shanghai Composite dipped 0.12% to 3,374.27
• In data on Monday, Japanese revised industrial production was at 2%, down slightly from the initial reading of 2.1%.
• In US data, the Empire State manufacturing index came in at 30.2, a big increase from an expected print of 20.3.
• Today’s economic agenda is busy with UK data that includes CPI, producer prices, retail prices and house prices, while the EU has CPI and the German ZEW economic sentiment index. There is also a host of US data including import prices, capacity utilisation rate, industrial production, and the NAHB housing market index.
• In addition, Bank of England governor Mark Carney and US Federal Open Market Committee member Patrick Harker are speaking.