LIVE FUTURES REPORT 21/03: Most SHFE base metals prices weaker on possible US rate rise, trade war fears

Base metal prices on the Shanghai Futures Exchange were broadly lower during Asian morning trading on Wednesday March 21 with the risk-off tone persisting amid fears of a trade war between the United States and China, and ahead of the US Federal Open Market Committee’s (FOMC) monetary policy meeting later today.

The most-traded May copper contract on the SHFE was at 50,910 yuan ($8,039) per tonne as of 10.21am Shanghai time, down by 530 yuan per tonne from Tuesday’s closing price, with around 200,000 lots of the contract traded.

The threat of a trade war with China raised concerns about the impact on demand for metals after reports suggested that US President Donald Trump is looking at announcing new sanctions on Chinese imports, in particular metal-intensive products such as electronics and electrical appliances, ANZ Research said on Wednesday.

Trump is preparing to impose a package of $60 billion in annual tariffs against Chinese products, which he is expected to announce by Friday, The Washington Post reported, citing four unnamed senior administration officials.

This follows Trump’s recent sign-off on import tariffs on steel and aluminium imports into the US.

On Wednesday, the US central bank is widely expected to raise its policy rate by 25 basis points, taking the Federal Funds target rate to 1.5-1.75% during its monetary policy meeting. Investors will also be looking for clues on the pace of further monetary tightening this year in the FOMC’s statement.

“The market remains concerned over slower economic growth in China and possible global trade wars while the upcoming FOMC meeting has led to more caution,” China’s Minmetals Jingyi Futures said on Tuesday.

“But in the medium term, against the backdrop of capacity commissioning by the Chinese copper smelters, copper prices could see support from a tightening raw material market,” the broker added.

In copper news, the main union at Antofagasta’s Los Pelambres copper mine has agreed to extend government-led mediation by five days, postponing a potential strike there.

Rest of complex lower; lead and tin slightly higher

  • The SHFE May aluminium contract slipped 90 yuan to 13,900 yuan per tonne.
  • The SHFE May zinc contract fell 275 yuan to 24,495 yuan per tonne.
  • The SHFE May lead contract price increased 45 yuan to 18,370 yuan per tonne.
  • The SHFE July nickel contract dipped 990 yuan 101,760 yuan per tonne.
  • The SHFE May tin contract price rose 380 yuan to 144,130 yuan per tonne.

Currency moves and data releases

  • The dollar index fell 0.1% to 90.30 as of 10.10am Shanghai time. The index had reached as high as 90.45 on March 20, the highest since March 1, on expectations of the FOMC’s rate rise and weaker export currencies amid fears of a global trade war.
  • In other commodities, the Brent crude oil spot price rose 0.19% to $67.72 per barrel as of 10.12am Shanghai time.
  • In equities, the Shanghai Composite gained 0.72% to 3,314.21 as of 10.12am Shanghai time, tracking Tuesday gains on the Dow Jones Industrial Average. The Dow closed 116 points or 0.47% higher at 24,727.27 on Tuesday.
  • The economic agenda is light today with mainly existing home sales and crude oil inventories from the US of note.
  • In addition, there is the FOMC’s rate decision and statement.

SHFE snapshot at 10:21am Shanghai time
Most-traded SHFE contracts
  Price (yuan per tonne) Change since previous session’s close (yuan)
Copper (May) 50,910 -530
Aluminium (May) 13,900 -90
Zinc (May) 24,495 -275
Lead (May) 18,370 45
Tin  (May) 144,130 380
Nickel  (Jul) 101,760 -990

LME snapshot at 02:21am London time
Latest three-month LME Prices
  Price ($ per tonne) Change since previous session’s close ($)
Copper 6,774 19
Aluminium 2,082 6
Lead 2,376 24
Zinc 3,207.50 4.5
Tin 20,765 90
Nickel 13,445 0

Changjiang spot snapshot on March 21
  Range (yuan per tonne) Change (yuan)
Copper  50,530-50,550 -380
Aluminium 13,690-13,730 -90
Zinc 24,450-24,500 -210
Lead 18,400-18,600 0
Tin  143,500-145,000 -250
Nickel  100,900-101,400 -400
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