LIVE FUTURES REPORT 19/07: SHFE copper up 1.7% amid weaker dollar; zinc down 0.4%

Barring those for zinc, base metals prices on the Shanghai Futures Exchange were all up during morning trading on Friday July 19 following a retreat in the dollar index overnight.

Copper led the charge higher this morning with a gain of 1.7% as at 9.29am Shanghai time. Nickel put in a respectable performance to rise 1.2%, while tin, lead and aluminium were up by between 0.6% and 0.8%. Zinc was the sole metal in negative territory with a drop of 0.4%.

The broad-based strength in the SHFE base metals complex follows a softening in the US currency overnight after dovish comments from New York Federal Reserve president John Williams on Thursday.

“Williams went out with a dovish bang in one of the last speeches from a Fed official before heading into the blackout ahead of the 31 July [Federal Open Market Committee] meeting. Williams raised concerns about low inflation expectations and said that the Fed should act quickly and aggressively when the need for stimulus arises,” Daniel Been, analyst at ANZ Research, said in a morning note.

Williams spoke as the policymaking Federal Open Market Committee is expected to cut its benchmark interest rate during the July 30-31 meeting.

“Market pricing for a 50-basis-point cut at the upcoming meeting increased, as some saw Williams’ comments as opening back up the possibility of a 50-basis-point cut,” Been added.

As a result, the dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, fell below the psychological level of 97 to 96.84 as of 9.29am Shanghai time on Friday. This is down from 97.13 at a similar time on Thursday.

In copper, prices received additional support from signs of a tightening concentrate market, which resulted in the red metal outperforming its peers on the SHFE this morning.

The most-traded September copper contract on the SHFE rose to 47,580 yuan ($6,915) per tonne as at 9.29am Shanghai time, up by 800 yuan per tonne, from Thursday’s closing price of 46,780 yuan per tonne.

“Spot treatment and refining charges (TC/RCs) for copper concentrates continued to hover around low levels on July 12, pointing to very tight concentrate supply conditions. This should constrain refined output growth in the second half of the year, exerting upward pressure on prices,” Boris Mikanikrezai, Fastmarkets research analyst, said.

The International Copper Study Group (ICSG) forecasts the global refined copper market to record a deficit of 189,000 tonnes for 2019, while the International Wrought Copper Council (IWCC) projects a deficit of 312,000 tonnes this year. Fastmarkets’ analysts expect a deficit of 217,000 tonnes for 2019.

Other highlights

  • Zinc bucked the stronger tone exhibited by its peers on the SHFE with the metal’s most-traded September contract on the SHFE dipping by 70 yuan per tonne, or 0.4%, to 19,530 yuan per tonne as at 9.29am Shanghai time from Thursday’s closing price of 19,600 yuan per tonne.
  • In US data on Thursday, the latest Philadelphia Federal Reserve Manufacturing Index for July improved to 21.8, from a reading of 0.3 previously. In addition, US unemployment claims were in line with expectations at 216,000, but higher than the previous 208,000.
  • In data on Friday, preliminary University of Michigan consumer sentiment and inflation expectations are of note.
  • In addition, Federal Open Market Committee members James Bullard and Eric Rosengren are speaking.
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