LIVE FUTURES REPORT 18/09: SHFE base metals prices hit by fresh US tariffs; zinc, copper most resilient

US President Donald Trump’s administration announced overnight that it would impose import taxes on 6,000 items, marking the biggest round of US tariffs so far. The taxes will come into effect from September 24, starting from 10% and increasing to 25% from January 1, 2019, unless the two countries can agree a deal.

“If China takes retaliatory action against our farmers or other industries, we will immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports,” Trump said in a statement.

In response, China has vowed to retaliate against any new US tariffs, with Beijing saying it would impose retaliatory duties on $60 billion’s worth of US-origin imports.

Market sentiment has taken a hit from the recent flare up in trade tensions, causing nickel, lead and tin prices to swing lower this morning. Aluminium prices were little changed, while copper and zinc seemingly shrugged off the latest salvo in the escalating trade war between China and the US, with the two the only base metals to register gains on the SHFE this morning.

Nickel was the SHFE’s worst performer this morning, with the metal’s most-traded November contract falling 0.5% or 440 yuan per tonne to 101,650 yuan ($14,800) per tonne as at 10.50am Shanghai time.

Concerns over weakened demand added to the gloomier outlook for nickel.

“Growing stainless steel stocks are putting pressure on domestic mills [in China] to reduce production, which will mean a decline in nickel consumption,” Metal Bulletin analyst Andy Farida said.

This ties in with data from Chinese information provider Antaike, which reported that China produced 13.6 million tonnes of stainless steel in the first six months of 2018, up 13.2% from a year ago, but apparent consumption was only at 11.2 million tonnes.

In copper, prices managed to tick higher this morning despite the negative macro backdrop for base metals at large. The red metal’s most-traded November contract climbed 460 yuan per tonne to 48,390 yuan per tonne as at 10.50am Shanghai time.

Red metal prices continue to be supported by solid fundamentals and “signs of tightening have become apparent since the start of the third quarter, most notably a sharp drawdown in exchange inventories”, Metal Bulletin analyst Boris Mikanikrezai said.
Copper stocks at London Metal Exchange-listed warehouses totaled 221,925 tonnes on Monday, down 24.6% from 294,525 tonnes on June 29.

Likewise, copper stocks in SHFE sheds have fallen significantly since the end of June; red metal inventories at SHFE-approved warehouses stood at 134,566 tonnes on September 14, down by 49% from 263,968 tonnes on June 29.

Base metals prices

• The SHFE November aluminium contract was unchanged at 14,445 yuan per tonne.
• The SHFE November zinc contract rose 390 yuan per tonne to 20,830 yuan per tonne.
• The SHFE October lead contract slid 100 yuan per tonne to 18,565 yuan per tonne.
• The SHFE January tin contract tumbled 270 yuan per tonne to 144,110 yuan per tonne.

Currency moves and data releases

• The dollar index inched up 0.01% to 94.58 as at 10.50am Shanghai time.
• In other commodities, the Brent crude oil spot price dropped 0.59% to $77.48 per barrel as of 10.50 am Shanghai.
• In equities, the Shanghai Composite fell 0.12% to 2,648.53 as of 11.59am Shanghai time.
• In data on Monday, the European Union’s core and headline consumer price indices were in line with expectations at 1% and 2% respectively. In the US, the Empire State Manufacturing Index disappointed with a print of 19, compared with a forecast 23.2.
• It is a quiet day for data on Tuesday, with only a speech from European Central Bank President Mario Draghi of note.