LIVE FUTURES REPORT 19/07: SHFE base metals prices rise on weaker dollar; copper recovers 1.2%

Despite concerns of an escalating global trade war continuing to hang over the market, an easier dollar provided the catalyst for a recovery in base metals prices.

The dollar index, at 95.03 as at 9.52am Shanghai time, retreated overnight on the back of softer than expected US economic data – see data section below. The index had reached a high of 95.41 on Wednesday, which was just below the double high of 95.54 reached on June 21 and 28.

“The sector overall was also supported by a reversal in USD strength, which had weighed on the sector earlier…,” ANZ Research noted on Thursday.

The most-traded September copper contract on the SHFE rose to 48,860 yuan ($7,293) per tonne as at 9.25am Shanghai time, up by 600 yuan per tonne or 1.2% from Wednesday’s closing price.

Concerns over a looming strike at the world’s largest copper mine, Escondida, lent further momentum to the red metal’s recovery. Last year, the mine suffered a 44-day outage and a fresh deadlock could emerge if a labor deal is not struck by the end of July.

BHP’s latest offer was rejected as it excluded two of the miners’ main demands: a 5% salary increase and a one-time bonus equivalent to a 4% dividends distributed to shareholders.

Elsewhere, strong demand from the electric vehicle (EV) sector also saw nickel resume its upward trend, with the metal’s most-traded September contract on the SHFE recording a gain of 0.8% so far this morning.

“From a fundamental viewpoint, downstream demand indicators are positive, with figures reinforcing expectations of the forthcoming EV evolution,” Metal Bulletin’s analyst Andy Farida said.

Base metals prices

• The SHFE September nickel contract gained 890 yuan per tonne to 109,800 yuan per tonne.
• The SHFE September zinc contract was up 745 yuan per tonne to 21,470 yuan per tonne.
• The SHFE August lead contract climbed 260 yuan per tonne to 19,110 yuan per tonne.
• The SHFE September tin contract increased 470 yuan per tonne to 145,110 yuan per tonne.
• The SHFE September aluminium contract rose 65 yuan per tonne to 14,090 yuan per tonne.

Currency moves and data releases

• The dollar index was down 0.05% to 95.03 as at 9.52am Shanghai time.
• In other commodities, the Brent crude oil spot price slid 0.45% to $72.72 per barrel as at 9.52am Shanghai.
• In equities, the Shanghai Composite was up by 0.3% to 2,795.54 as at 9.58am Shanghai time.
• In European data on Wednesday, the UK’s consumer price index (CPI) for June fell short of expectations at 2.4%, against an expected reading of 2.6%, while the house price disappointed with a print of 3% – 3.8% had been called for. The European Union’s CPI was in line with forecasts at 2.0% in June.
• In US data on Wednesday, building permits were recorded at 1.27 million units, which is 60,000 units short of the forecast at 1.33 million units and 30,000 units lower than the previous reading.
• Meanwhile, housing starts fell to their lowest level in nine months, coming in 250,000 units lower than expected at 1.17 million units and 280,000 units lower than the previous figure.
• In data today, we have the UK’s retail sales and US releases that include jobless claims and the Philadelphia Fed Manufacturing Index for July.
• In addition, US Federal Open Market Committee member Randal Quarles is speaking.