LIVE FUTURES REPORT 21/11: SHFE base metals prices under pressure from rising risk-off sentiment

Base metal prices on the Shanghai Futures Exchange were broadly lower during Asian morning trading on Wednesday November 21 amid a rise in risk-off sentiment stemming from weakness in global equity markets and a collapse in oil prices.

Aluminium was the lone base metal in positive territory on the SHFE this morning, with the rest of its peers all dropping as they succumbed to risk aversion stemming from weakness in wider markets on Tuesday.

Oil prices slumped on Tuesday, with Brent – the international crude oil benchmark – falling as much as 7% to a one-year low of $62 per barrel.

Investors are said to be increasingly concerned that any potential production cuts by the Organization of the Petroleum Exporting Countries (OPEC) would be insufficient to cover the surplus that exists in the market, according to ANZ Research.

Weakness in global equity markets added to the negativity in the market, which coupled with the prospect of drawn out trade tensions between China and the United States has sapped investors’ appetite for the base metals this morning.

Zinc was the worst performer among the SHFE base metals, with the metal coming under additional pressure from concerns over weak demand from galvanizing plants amid an environmental crackdown in China.

The most-traded January zinc contract price on the SHFE dropped to 20,975 yuan ($3,020) per tonne as at 10.01am Shanghai time, down by 510 yuan per tonne or 2.4% from Tuesday’s close.

“An escalating environmental crackdown in northern China over winter could force domestic Chinese galvanizing plants to reduce their operational rates,” Citic Futures Research said on Wednesday.

In copper, prices continued to be pressured by the general negativity surrounding the US-China trade war, which has offset any support stemming from expectations of a tightening copper concentrate market.

The most-traded January copper contract on the SHFE fell 380 yuan per tonne to 49,200 yuan per tonne as at 10.01am Shanghai time.

“From a fundamental perspective, the anticipation of a tightened copper concentrates supply has increasingly strengthened, while [refined metal] stocks on the London Metal Exchange have dropped quickly,” Guotai Junan Futures said, adding that the red metal prices are being pushed in opposite directions by fundamental and macroeconomic factors.

Base metal prices

  • The SHFE January copper contract price dropped by 380 yuan per tonne to 49,200 yuan per tonne.
  • The SHFE January aluminium contract price ticked up by 25 yuan per tonne to 13,735 yuan per tonne.
  • The SHFE January zinc contract price fell by 510 yuan per tonne to 20,975 yuan per tonne.
  • The SHFE January lead contract price retreated by 145 yuan per tonne to 18,155 yuan per tonne.
  • The SHFE January tin contract price declined by 1,830 yuan per tonne to 150,620 yuan per tonne.
  • The SHFE January nickel contract price dropped by 1,340 yuan per tonne to 91,970 yuan per tonne.

Currency moves and data releases

  • The dollar index was up 0.05% at 96.85 as at 10.01am Shanghai time.
  • In equities, the Shanghai Composite was down by 0.62% to 2,628.47 as at 10.43am Shanghai time.
  • In European data on Tuesday, the German producer price index (PPI) for October rose by 0.3% month on month, falling in line with expectations. The United Kingdom’s CBI industrial order expectations were better than expected with a reading of 10, compared with previous and expected readings of -6.
  • In US data on Tuesday, building permits and housing starts were broadly in line with expectations at 1.26 million and 1.23 million respectively.
  • The bulk of the data scheduled for release on Wednesday comes from the US, with core and headline durable goods orders, unemployment claims, the revised University of Michigan consumer sentiment and inflation expectations, CB leading index, existing home sales, crude oil inventories and natural gas storage.

London Metal Exchange, base metals prices

Shanghai Futures Exchange, base metals prices

Changjiang spot prices, base metals prices