LIVE FUTURES REPORT 19/10: SHFE aluminium supported by capacity cuts, rising alumina prices; copper retreats

Aluminium prices on the Shanghai Futures Exchange (SHFE) inched higher during Asian morning trading on Thursday October 19, supported by further winter capacity cuts in China and rising prices for alumina.

The most-traded December aluminium contract on the SHFE stood at 16,125 yuan ($2,435) per tonne as of 03:10 BST, up 45 yuan from the previous day’s close. Around 275,000 lots of the contract have traded hands so far.

News of aluminium capacity cuts in China ahead of the country’s winter season has buoyed light metal prices in recent weeks, although the actual amount of suspended capacity has failed to live up to market expectations, putting a lid on any substantial price gains.

On October 17, Liaocheng City in China’s Shandong province announced plans to suspend 381,900 tpy of aluminium and 2.6 million tpy of alumina capacity under Xinfa Group from November 15 to March 15, according to market sources.

On October 13, Binzhou City, another aluminium production hub in Shandong province, announced that it will cut 1.6 million tpy of aluminium capacity and at least 3 million tpy of alumina capacity as part of plans to reduce production during winter.

“Despite the slight retreat in [aluminium prices] in recent days, the positive fundamentals of supply and demand are still providing support to prices,” China’s Guotai Junan Futures said.

Additionally, recent surges in prices for alumina, the raw material used to produce aluminium, have also lent support to light metal prices.

Chinese alumina prices were assessed at 3,600-3,700 yuan per tonne on October 12, up 4.3% from previously, and marking the highest level since March 2008.

Meanwhile, Metal Bulletin’s fob Australian alumina index climbed up to $469.74 per tonne on October 12, hitting the highest level since Metal Bulletin launched the index in August 2010.

“Despite the high inventory and lower-than-expected winter capacity cuts, the sharp rise of raw material costs has lent strong support to aluminium prices,” Citic Futures Research said.

Copper price retreats as buying appetite wanes

  • The most-traded December copper contract fell 230 yuan to 54,660 yuan per tonne.
  • London Metal Exchange stocks increased a net 900 tonnes to 292,225 tonnes on October 18, with 2,075 tonnes rewarranted.
  • “[Copper] slipped as investors become reluctant to chase prices after the recent strong gains,” ANZ Research noted.
  • “More longs exit to take profits, and copper prices are subdued,” Guotai Junan Futures said.
  • “In addition, copper inventories rose and the spot copper premium retreated, which indicated the spot copper supply tightness has eased,” it added.

Zinc rebounds; rest of complex lower

  • The SHFE December zinc contract price rose 85 yuan to 25,380 yuan per tonne.
  • The SHFE December lead contract price lost 30 yuan to 19,365 yuan per tonne
  • The SHFE January nickel contract price dropped 960 yuan to 93,750 yuan per tonne.
  • The SHFE January tin contract price edged down 740 yuan to 144,740 yuan per tonne.

Currency moves and data releases

  • The dollar index was down 0.03% at 93.39 as of 03:10 BST.
  • In other commodities, the Brent crude oil spot price dipped 0.11% to $58.12 per barrel while the Texas light sweet crude oil spot price was down 0.06% to $52.02
  • In equities, the Shanghai Composite was down 0.41% to 3,367.84.
  • In US data on Wednesday, building permits and housing starts in September both disappointed at 1.22 million and 1.13 million, respectively.
  • In data on Thursday, China reported third-quarter gross domestic product (GDP) growth of 6.8% year on year, on par with the forecast reading but below the previous print of 6.9%. There had been expectations in the market that the world’s largest base metals consumer would see growth of around 7% from a year earlier.
  • Chinese industrial production surprised to the upside with an increase of 6.6% against an expected reading of 6.4% and a previous reading of 6.0%.
  • China’s fixed asset investment missed with a reading of 7.5% – 7.7% had been expected. This was also lower the previous print of 7.8%.
  • Staying with China, Chinese President Xi Jinping gave his opening speech at the 19th Communist Party Congress on October 18, saying China was working toward “socialist modernisation” and that “It is time for [China] to take centre stage in the world and to make a greater contribution to humankind.”
  • Data out later today includes UK retail sales, US unemployment claims, Philly Fed manufacturing index, CB leading index and natural gas storage.
LME snapshot at 0310 London time
Latest 3M LME Prices
Price ($/t) Change since yesterday’s close ($)
Copper 6,979.5 -10.5
Aluminium 2,120 -1
Lead 2,500 -22
Zinc 3,110 -11
Tin 19,985 -95
Nickel 11,655 5
SHFE snapshot at 0310 London time
Most traded SHFE contracts
Price (yuan/t) Change since yesterday’s close (yuan)
Copper 54,660 -230
Aluminium 16,125 45
Zinc 25,380 85
Lead 19,365 -30
Tin 144,740 -740
Nickel 93,750 -960

Changjiang spot snapshot on October 19
Range (yuan/t) Change (yuan)
Copper 54,890—54,930 -490
Aluminium 15,960 — 16,000 -40
Zinc 26,040—26,840 130
Lead 20,100—20,300 -250
Tin 143,000—145,500 -500
Nickel 93,900—94,200 -500
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