LIVE FUTURES REPORT 21/02: SHFE base metals prices weaken on coronavirus jitters; Pb edges up by 0.2%

Base metals prices on the Shanghai Futures Exchange were broadly down at the close of morning trading on Friday February 21, with risk appetite weakening due to a rise in novel coronavirus (2019-nCoV) cases outside of China.

Market participants remain focused on continuing efforts in China to prevent the spread of the virus and what sort of impact this will have on the Chinese economy. But a rise in infections globally, including a jump in reported cases in South Korea, has amplified fears that the virus could have a wider effect too.

China has reported a total of 75,465 confirmed cases of the virus and 2,236 deaths so far, according to figures from the National Health Commission. Meanwhile, South Korea reported 52 new cases on Friday, after a rise of 53 on Thursday.

Preventative measures in China, such as transport and travel restrictions, are affecting business activity in China, which has led to concerns over demand for the base metals as well as other commodities.

“Industrial metals remain under pressure. Delays in the restart of business activity in China has seen a revival of concerns for commodities demand,” Catherine Birch, senior economist at ANZ Research, said in a morning note.

Against this negative backdrop, the SHFE base metals were broadly down this morning with nickel giving the worst performance of its peers while it contends with lackluster downstream demand and growing inventories.

The most-traded April nickel contract was at 103,030 yuan ($14,675) per tonne at the close of morning trading, down by 1% or 1,050 yuan per tonne from Thursday’s close of 104,080 yuan per tonne.

“The stainless steel sector is weak now, which is causing nickel inventories to grow, and this is weighing on the market. At the same time, demand is also being affected by the ongoing coronavirus,” an analyst at China-based brokerage Citic Futures said.

Losses were also seen in April aluminium (-0.5%) at 13,605 per tonne, April zinc (-0.4%) at 17,105 yuan per tonne, June tin (-0.4%) at 135,260 yuan per tonne and April copper (-0.3%) at 46,300 yuan per tonne.

Lead was the sole metal to end in positive territory at the close of the morning session, albeit up by a marginal amount, with its April contract rising by 0.2% to 14,565 yuan per tonne.

Other highlights

  • The dollar index, which gauges the strength of the United States dollar against a basket of foreign currencies, was by down 0.02% to 99.84 as at 11.31am Shanghai time.
  • Chinese data released on Thursday showed new loans rose to a record high of 3.34 trillion yuan in January, as authorities step up efforts to support the economy through the ongoing coronavirus threat.
  • Also on Thursday, China’s central bank announced a cut to its benchmark lending rate, the one-year loan prime rate, by 0.1 percentage point to 4.05 percent. The cut was the largest since the loan prime rate was introduced in August 2019.
  • Friday is a busy day for data releases with a host of manufacturing and services purchasing managers’ index (PMI) readings out across Europe and the United States. The European Union’s final consumer price index is also due.