LIVE FUTURES REPORT 21/02: SHFE base metals prices mixed following FOMC minutes; Cu supported

Base metals prices on the Shanghai Futures Exchange were on divergent paths during Asian morning trading on Thursday February 21, with copper, tin and nickel edging higher, while the others were little changed to slightly weaker.

The mixed movements follow the overnight release of the minutes from the US Federal Open Market Committee’s (FOMC) January meeting, in which the central bank left open the possibility it could lift US interest rates later this year.

Following four interest rate increases in 2018, the Federal Reserve announced in January that it would pause further rate rises, keeping the benchmark federal funds rate unchanged at the 2.25-2.5% target range. Yet it was unclear how long the central bank planned to hold back on raising rates.

The FOMC meeting minutes released overnight “showed that the officials favored ending the runoff of the central bank’s balance sheet while expressing uncertainty over whether they would raise interest rates again this year. On balance, the Fed judged that a ‘patient’ approach to interest rate hikes is the best path forward,” Kishti Sen, international economist at Australia and New Zealand Banking Group (ANZ), said in a morning note.

The news of potential further monetary tightening this year had a generally positive effect on the dollar index, which at 96.51 as at 11.32am Shanghai time, is up from a low of 96.28 on Wednesday. The index remains well below its recent high of 97.37 reached on February 15, however.

In copper, prices on the SHFE were slightly higher during the morning session on Thursday. The most-traded May copper contract stood at 49,590 yuan ($7,371) per tonne as at 10.27am Shanghai time, up by 0.1% or 70 yuan per tonne from Wednesday’s close.

This follows a stronger performance by the red metal on the London Metal Exchange on Wednesday. The three-month copper price closed Wednesday at $6,405 per tonne, $86 per tonne higher than the previous day’s close.

Red metal prices have found support from of a number of recent supply-side developments and rising demand in China following the Lunar New Year holiday (February 4-10).

“Copper prices broke through USD6,300/t amid multiple supply issues and firmer demand in China. Heavy rain in Chile could potentially affect the production at the Chuquicamata and Radomiro Tomic mines. Some companies have already suspended operations due to the rain,” ANZ’s Sen said.

“On demand side, Chinese downstream companies increased their purchases after Chinese New Year holidays,” he added.

Elsewhere in the base metals, tin and nickel prices on the SHFE saw gains of 0.2% and 0.3% respectively, while aluminium was unchanged and zinc and lead were little changed with a slightly downward bias.

Base metals prices

  • The SHFE April aluminium contract was flat at 13,520 yuan per tonne.
  • The SHFE April zinc contract inched down by 5 yuan per tonne to 21,625 yuan per tonne.
  • The SHFE April lead contract was down by 5 yuan per tonne to 16,780 yuan per tonne.
  • The SHFE May tin contract was up by 320 yuan per tonne to 150,800 yuan per tonne.
  • The SHFE May nickel contract rose by 290 yuan per tonne to 101,000 yuan per tonne.

Currency moves and data releases

  • The dollar index was down by 0.04% to 96.51 as of 11.32am Shanghai time.
  • In equities, the Shanghai Composite was up by 0.36% to 2,771.28 as of 11.30am Shanghai time. In European data on Wednesday, the German producer price index (PPI) increased by 0.4% in January, compared with the prior month. This was better than the forecast 0.2% month-on-month decline.
  • EU consumer confidence rose to -7.4 in February, up by 0.5 points from a month earlier and slightly better than an expected reading of -7.8.
  • In UK data, Confederation of British Industry (CBI) industrial order expectations rose to 6 in February, from January’s reading of -1.
  • The economic agenda is very busy on Thursday with flash services and manufacturing purchasing managers’ index (PMI) data from Germany, France, the European Union and the United States.
  • Other European releases scheduled for Thursday include German and French final consumer price index (CPI) data, UK public sector net borrowing and the meeting accounts from the European Central Bank’s monetary policy meeting.
  • In addition, there is a host of US releases later on Thursday that includes durable goods orders, the Philadelphia Federal Reserve manufacturing index, unemployment claims, Conference Board leading index, existing home sales, natural gas storage and crude oil inventories.

London Metal Exchange, base metals prices

Shanghai Futures Exchange, base metals prices

Changjiang spot prices, base metals prices