LIVE FUTURES REPORT 18/07: SHFE base metals prices remain under pressure; copper trends downward

Base metals prices on the Shanghai Futures Exchange remained under pressure during Asian morning trading on Wednesday July 18, with concerns over trade wars and a slowing Chinese economy weighing on the complex.

The SHFE base metals were split into two camps during the early Asia session on Wednesday, with copper, aluminium and nickel prices edging downward, while the rest of the metals registered marginal gains.

Copper led on the downside with its most-traded September contract on the SHFE trading at 48,650 yuan ($7,268) per tonne as at 9.33am Shanghai time, down by 160 yuan per tonne or 0.3% from Tuesday’s closing price.

The United States’ protectionist rhetoric and its tit-for-tat spat with China continues to weigh on the base metals, while disappointing Chinese economic data compounds the bleak outlook for the complex.

China’s gross domestic product (GDP) growth slowed to 6.7% in the second quarter of 2018, from 6.8% in the first quarter, stoking fears of reduced metal demand in the country.

“Disappointing domestic macroeconomic statistics [from China] add to downward pressure,” Citic Futures noted on Wednesday.

Meanwhile, a firmer dollar overnight has further dented sentiment toward the base metals.

The dollar index has climbed above the 95 mark again and was recently at 95.09 on Wednesday morning – this compares with a reading of 94.51 at roughly the same time on Tuesday.

Yet the weakness in copper has been fairly limited, with the metal finding support from potential supply-side disruption amid ongoing labor negotiations in Chile.

“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.

Base metals prices

  • The SHFE September zinc contract rose 155 yuan per tonne to 20,385 yuan per tonne.
  • The SHFE August lead contract edged up 20 yuan per tonne to 18,780 yuan per tonne.
  • The SHFE September tin contract was up 350 yuan per tonne to 144,400 yuan per tonne.
  • The SHFE September nickel contract slid 360 yuan per tonne to 108,780 yuan per tonne.
  • The SHFE September aluminium contract slid 20 yuan per tonne to 14,055 yuan per tonne.

Currency moves and data releases

  • The dollar index was up by 0.08% at 95.09 as at 12.16pm Shanghai time.
  • In other commodities, Brent crude oil was up 0.37% at $71.83 per barrel as at 12.30pm Shanghai time.
  • The Shanghai Composite Index was up by 0.51% at 2,812.34 as at 11.30am Shanghai time.
  • In data on Tuesday, the United Kingdom’s average earnings index and unemployment rate were in line with expectations at 2.5% and 4.2% respectively, but there was an unexpected rise in the number of people in the UK claiming benefits. The claimant count rose by 7,800 people, compared with a forecast increase of 2,300 people.
  • US data on Tuesday was mixed with the country’s capacity utilization rate falling short of expectations at 78% – 78.4% had been called for. Meanwhile, industrial production surprised to the upside with a 0.6% gain, against an expected increase of 0.5%.
  • In European data on Wednesday, we have the UK’s consumer price index (CPI), producer price index, retail price index and house price index, while the European Union’s CPI is also due.
  • US data out on today includes building permits, housing starts, crude oil inventories and the Federal Reserve’s beige book.
  • In addition, Federal Reserve chair Jerome Powell is testifying before House Financial Services Committee in Washington DC.