LIVE FUTURES REPORT 23/01: SHFE copper leads base metals lower; lead prices supported by growing supply deficit

The most-traded March copper contract on the SHFE fell to 53,680 yuan ($8,381) per tonne as of 10.02am Shanghai time, down by 220 yuan from the previous session’s close.

China’s refined copper production stood at 8.89 million tonnes in 2017, a year-on-year increase of 7.7%, while December output came in at a record high of 865,000 tonnes, according to the country’s National Bureau of Statistics.

“Chinese refined copper production hit a record high [in December], which has dampened sentiment in the market; this aside from the fact that SHFE copper stocks have risen for three consecutive weeks [this year],” analysts with Citic Futures Research noted.

SHFE deliverable red metal stocks rose by 8,804 tonnes or 5.3% to 176,233 tonnes as of January 19. This followed increases of 6,988 tonnes and 9,952 tonnes on January 12 and 15 respectively.

Meanwhile, copper stocks on the London Metal Exchange edged 125 tonnes higher to 211,775 tonnes on Monday.

“Copper prices remain valuable in the near term given that the market hasn’t seen any spot stockpiling for the Chinese New Year holiday,” analysts at Citic Futures Research added.

Lead buoyed by expectations of further supply tightness

• Lead prices on the SHFE were the lone metal in positive territory this morning, with the SHFE March lead contract rising 55 yuan to 19,535 yuan per tonne as of 10.02am Shanghai time.
• “A growing market deficit, ongoing tightness in the global lead concentrate market and a robust macroeconomic backdrop are supportive elements that have fueled the LME lead price into a fresh 2018 high,” Metal Bulletin analyst Andy Farida said.
• The global refined lead market recorded a deficit of 169,000 tonnes year-to-date through November 2017, according to the International Lead & Zinc Study Group.
• “On the supply side, resumption of operations at lead refineries [in China’s] Henan province has slowed down due to recent escalation of air pollution,” Citic Futures Research analysts said.
• “On the consumption side, rising demand from the battery sector is seen ahead of Chinese New Year holiday,” they added.

Other base metals under pressure

• The SHFE March aluminium contract price dropped by 30 yuan to 14,630 yuan per tonne.
• The SHFE March zinc contract price dipped by 115 yuan to 26,095 yuan per tonne.
• The SHFE May nickel contract price fell by 410 yuan to 98,130 yuan per tonne
• The SHFE January tin contract price was down by 210 yuan to 146,480 yuan per tonne.

Currency moves and data releases

• The dollar index was down by 0.05% at 90.36 as of 10.02am Shanghai time.
• In other commodities, the Brent crude oil spot price was up 0.18% to $69.33 per barrel as of 10.02 am Shanghai time.
• In equities, the Shanghai composite was up by 0.6% at 3523.64 as of 11:30.am Shanghai time.
• In data today, we have public sector net borrowing and CBI industrial order expectations from the United Kingdom as well as German ZEW economic sentiment, EU consumer confidence and the Richmond Manufacturing Index from the United States.
• In addition, day one of the World Economic Forum held in Davos, Switzerland, gets underway today while the Eurozone’s Economic and Financial Affairs Council has meetings scheduled throughout the day.