LIVE FUTURES REPORT 22/10: SHFE zinc prices pressured downward by large inflows; other metals little changed

The most-traded December zinc contract price declined to 21,805 yuan ($3,147) per tonne as at 9.30am Shanghai time, down by 335 yuan per tonne from last Friday’s close.

An opening of the zinc import arbitrage window from late June to late September triggered extensive deliveries of the metal into China. Profits on importing zinc into China hit a historical high of $283.62 per tonne on September 17, according to Fastmarkets MB’s calculations.

As a result, the market also witnessed large inflows of zinc from bonded warehouses in Shanghai into the domestic market, adding more supply to the spot market and putting downward pressure on prices for the metal.

Deliverable zinc stocks at SHFE sheds rose by 10,106 tonnes or 23.3% last week to 53,479 tonnes as of October 19. Meanwhile, Fastmarkets MB assessed zinc stocks at bonded warehouses in Shanghai at 28,000-33,000 tonnes on October 9, compared with the 156,000-161,000 tonnes assessed on July 2.

In copper, prices have been buoyed by comments made by China’s vice-premier Liu He at a meeting of top economic and financial policy makers on Sunday.

The most-traded December copper contract price rose by 190 yuan per tonne to 50,350 yuan per tonne as at 9.29am Shanghai time.

Liu’s comments, by which he attempted to dispel worries surrounding economic growth in China and the uncertainties stemming from the trade war with the United States, provided welcomed relief to markets which had earlier been rocked by China’s disappointing gross domestic product release (GDP) – see data section below.

Liu also reiterated China’s commitments to further open up the banking, securities and insurance sectors.

“China should balance between the need for stable growth and risk management, and will maintain a prudent and neutral monetary policy,” he said.

“Prices took a hit earlier in the week after the release of economic data showed Chinese GDP growth had fallen to its lowest level since the financial crisis in 2009. However, China’s senior officials moved to shore up confidence in the economy with verbal support, including some specific measures such as using policy tools to boost banks credit expansion,” ANZ Research noted.

The rest of the complex was broadly little changed with a slight upside bias, with nickel, lead and tin prices edging marginally higher, while aluminium prices softened.

SHFE base metals split into two camps, moves limited

• The SHFE December copper contract was up by 190 yuan per tonne to 50,350 yuan per tonne.
• The SHFE December aluminium contract dipped by 80 yuan per tonne to 14,065 yuan per tonne.
• The SHFE December zinc contract dropped by 335 yuan per tonne to 21,805 yuan per tonne.
• The SHFE January nickel contract moved down by 70 yuan per tonne to 103,370 yuan per tonne.
• The SHFE November lead contract edged up by 5 yuan per tonne to 18,280 yuan per tonne.
• The SHFE January tin contract ticked up by 140 yuan per tonne to 146,990 yuan per tonne.

Currency moves and data releases

• The dollar index was up 0.06% at 95.73 as at 9.31am Shanghai time.
• In other commodities, the Brent crude oil spot price was at $79.75 per barrel as at 9.31am Shanghai time, down 0.23% from last Friday’s close.
• In equities, the Shanghai Composite Index was up 3.03% to 2,520.53 as at 10.19am Shanghai time.
• In a data-heavy day last Friday, Chinese releases showed economic growth in the country slowed more than expected in the third quarter of this year; the world’s second-largest economy grew by 6.5% year on year in July-September, missing an expected increase of 6.6%. Chinese industrial production and fixed asset investment, meanwhile, were largely in line with expectations with grow of 5.8% and 5.4% respectively.
• Staying with China, the country’s September retail sales were better than expected with year-on-year growth of 9.2%, compared with an expected increase of 9%, while unemployment dipped to 4.9% in the same month from 5% previously.
• In US data last Friday, existing home sales declined by the most in two years last month, falling by 3.4% to a seasonally adjusted rate of 5.15 million units. Home sales have now fallen for six consecutive months.
• The economic agenda is light on Monday, with only the German Bundesbank monthly report of note.