LIVE FUTURES REPORT 19/06: SHFE base metals prices all up amid easing trade tensions, policymakers’ dovishness

Base metals prices on the Shanghai Futures Exchange were up across the board during morning trading on Wednesday June 19 amid renewed trade optimism and a more dovish tone from policymakers.

The broad-based strength exhibited by the SHFE base metals follows comments from US president Donald Trump on social media overnight that he will meet with Chinese counterpart Xi Jinping at the Group of Twenty (G20) meeting in Japan later this month.

In a post on news and social networking site Twitter, Trump said, “Had a very good telephone conversation with President Xi of China. We will be having an extended meeting next week at the G-20 in Japan. Our respective teams will begin talks prior to our meeting”.

While analysts acknowledged that an immediate deal was unlikely, the confirmation that the two sides were willing to resume talks was enough to spur some optimism in markets this morning.

Adding to the renewed positivity was the dovish tone struck by European Central Bank (ECB) president Mario Draghi emphasized on Tuesday, after he emphasized that the ECB will ease policy further if it feels its inflation target is under threat, signaling that further stimulus measures in the eurozone may be necessary.

“This dovish assessment [from the ECB] comes just ahead of the [US Federal Opening Market Committee (FOMC) meeting on Wednesday] where there is some nervous speculation that the FOMC might act pre-emptively,” Cherelle Murphy, senior analyst at ANZ said in a morning note.

As a result, base metals prices on the SHFE were up across the board this morning, with August aluminium and zinc up by 0.3% and 0.5% respectively, July lead up by 0.4% and September tin up by 0.5%. Copper and nickel were the biggest movers, however, with both metals benefitting from supply uncertainty amid various market developments.

The most-traded August copper contract climbed to 46,900 yuan ($6,779) per tonne as at 10.30am Shanghai time, up by 570 yuan per tonne, or 1.2%, from Tuesday’s close of 46,330 yuan per tonne.

Nickel outshone copper, however, with the former’s most-traded August contract rising to 99,690 yuan per tonne as at 10.30am Shanghai time, an increase of 1,510 yuan per tonne, 1.5%, from its previous close of 98,180 yuan per tonne.

In copper, supply uncertainty increased in line with news that strike action at Codelco’s Chiquicamata mine continues and that workers had clashed with police during attempts to block access to the operation.

Elsewhere, Zambia’s Mopani Copper Mines (MCM) has shut its Mufulira smelter until the end of the year to undergo major refurbishment, the Glencore-owned company said on Monday.

In nickel supply news, Vale has suspended all nickel-processing activities at its Onça Puma plant in the Brazilian state of Para on judicial orders, it said Monday. Mineral extraction at the site has been suspended since September 2017.

Other highlights

  • The dollar index was up by 0.02% at 97.65 as at 11.59 am Shanghai time.
  • The Shanghai Composite Index was up by 1.52% at 2,934.05 as at 11.30 am Shanghai time.
  • In data on Wednesday, market participants will focus on the conclusion of the FOMC’s meeting, following which the committee will provide its economic projections, issue its statement and hold a press conference.