LIVE FUTURES REPORT 20/02: Firm dollar pressures SHFE base metals prices

With the exception of tin that was little changed, base metals prices on the Shanghai Futures Exchange were down at the close of morning trading on Thursday February 20, with the complex coming under pressure from a strengthening dollar index.

February 20, 2020

By Hui Li

The dollar index, which gauges the strength of the United States dollar against a basket of foreign currencies, was at 99.68 as at 11.33am Shanghai time. This is up from 99.42 at a similar time on Wednesday and the index remains near its highest in three years.

Concerns surrounding a build-up of inventories due to logistical constraints in China and the slow restart of operations by certain companies amid ongoing attempts to contain the ongoing novel coronavirus (2019-nCoV) outbreak in the country are also dampening sentiment this morning.

“We expect demand to recover soon due to the government’s virus containment measures and its calls for work to resume gradually. But this demand won’t come all at once, it takes time,” a metals analyst based in Shanghai told Fastmarkets on Thursday.

Lead was the worst performer of its complex over the morning session, with the heavy metal’s most-traded April contract dropping to 14,505 yuan ($2,072) per tonne, down by 0.3% or 50 yuan per tonne from Wednesday’s close of 14,555 yuan per tonne.

SHFE lead stocks rose by 34.5% or 9,513 tonnes last week to total 37,092 tonnes as of February 14. Other notable increases include a 27.4% gain in copper stocks and a 24.4% rise in zinc stocks.

Meanwhile, losses were also observed in the April nickel contract (-0.3%) at 103,510 yuan per tonne, April aluminum (-0.2%) at 13,680 yuan per tonne, April copper (-0.2%) to 46,320 yuan per tonne and April zinc (-0.1%) to 17,150 yuan per tonne.

June tin ended the morning session in positive territory on Thursday, albeit up by just 10 yuan per tonne from its close on Wednesday at 135,710 yuan per tonne.

Other highlights

The Shanghai Composite Index was up by 0.47% at 2,989.31 as at 11.30am Shanghai time.
In US data on Wednesday, the producer price index (PPI) rose by a seasonally adjusted 0.5% in January, more than the expected 0.1% increase. Building permits and housing starts also rose by more than expected last month, with increases of 1.55 million units and 1.57 million units respectively.
Economic releases scheduled for Thursday include Germany’s GfK consumer climate and PPI, the United Kingdom’s retail sales and Confederation of British Industry industrial order expectations, a reading of European Union consumer confidence as well as the European Central Bank’s monetary policy meeting accounts.
US releases of note include the Philadelphia Fed Manufacturing Index, unemployment claims and Conference Board leading index.