MethodologyContact usLogin
Fresh concerns over US-China trade tensions were triggered by an exchanging of barbs between US Vice President Mike Pence and Chinese President Xi Jinping at the Asia-Pacific Economic Cooperation (APEC) summit in Papua New Guinea this past weekend.
Leaders at the summit also failed to agree on a communique for the first time in APEC’s history.
“There are renewed concerns about US-China trade tension, following pointed comments and a lack of agreement at the APEC summit over the weekend, adding to more generalized concerns over global growth,” ANZ Research said on Tuesday.
“Trade talks soured beyond the APEC disarray after inside sources told the South China Morning Post that Liu He, China’s chief trade negotiator, and Steven Mnuchin, Treasury Secretary, have rescheduled their talks for Buenos Aires instead of Washington after “work-level discussions,” Stephen Innes, head of trading for Asia Pacific at Oanda, noted.
As a result, participants expect the pessimistic tone in the market to persist at least until the meeting of leaders of the Group of Twenty (G20) major economies in Buenos Aires, Argentina, from November 30-December 1, with this negative outlook denting investors’ appetite for the base metals this morning.
“On the Trump- Xi G20, we should expect more freeze than thaw on this outcome if the APEC disarray was any sign of things to come,” Innes added.
Zinc was the worst performer of the SHFE base metals complex this morning, with the metal’s most-traded January zinc contract price declining to 21,480 yuan ($3,093) per tonne as at 10.49am Shanghai time, a drop of 95 yuan to tonne compared with Monday’s close.
The rest of the complex were similarly weaker, with only nickel, which was unchanged, and lead not recording losses.
That said, the weakness in the SHFE base metals has been fairly limited so far this morning, with the comparatively weaker dollar following dovish rhetoric from the US Federal Reserve offsetting the negativity stemming from trade concerns.
The dollar index continues to retreat from a peak of 97.70 reach on November 14. The index was at 96.25 as at 9.56am Shanghai time.
“The Fed is still widely expected to increase rates for the fourth time this year in December, but market pricing has slid from the 80% probability priced during mid-October to 67% priced in currently,” ANZ Research said.
“It appears that the Fed may be preparing the market for a significant shift in the dot plots in December, with the path for rate hikes through 2019 looking more uncertain,” ANZ Research added.
Lead, the lone metal in positive territory, continues to find support from tightening supply fundamentals. Lead’s most-traded January contract on the SHFE rose 140 yuan per tonne to 18,345 yuan per tonne at 10.49am Shanghai time.
“Lead miners are struggling due to low grades and environmental inspections in China, with global mine production declining by 0.9% in January-September 2018, according to International Lead & Zinc Study Group (ILZSG) estimates. A supply response in zinc has provided little in the way of additional lead concentrate supplies. Treatment charges (TCs) in the international market remained confined to narrow ranges in low ground in October, reflecting persistently tight availability,” Fastmarkets analyst James Moore said.
“The fundamentals in the refined lead market are set to remain supportive in 2018-2019, according to a forecast by ILZSG, which projects the market will record a 123,000-tonne deficit in 2018 and a further 17,000-tonne shortfall in 2019. ILZSG pegged the refined lead market in a deficit of 110,000 tonnes in January-September 2018,” Moore added.
Base metals prices
Currency moves and data releases