LIVE FUTURES REPORT 23/09: Negative trade developments pressure SHFE base metals prices

Base metals prices on the Shanghai Futures Exchange were largely down during the morning trading session on Monday September 23, with risk sentiment deteriorating following negative developments in United States-China trade negotiations.

The latest face-to-face talks in Washington between trade negotiators from both the US and China at the end of last week seem to have failed to yield any fruitful result, eradicating any previous optimism and reigniting fears of further a further escalation in the trade conflict.

“The Chinese embassy has cancelled a number of US farm visits, which were labelled by US Agriculture Department Secretary, Sonny Perdue, as a building of ‘goodwill’. The news added to the market’s woes, as sentiment had already stalled following [US President Donald] Trump’s comments that he isn’t looking for a partial trade deal with China,” Kishti Sen, analyst at Australia and New Zealand Banking Group (ANZ), said in a morning note.

The negative signals from the latest round of trade talks dampened investors’ appetite for commodity investment, with the risk-off tone filtering through commodity markets to exert downward pressure on most of the SHFE base metals this morning.

Meanwhile, a firm US currency is acting as a broad headwind for the SHFE base metals complex.

The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was up by 0.02% at 98.48 as at 9.47am Shanghai time.

Losses across the SHFE base metals complex were marginal, however, ranged between a 0.1% decline in copper and aluminium and a 0.4% drop in nickel. Tin and lead bucked the downtrend with gains of 0.6% and 0.1% respectively.

Nickel exhibited the worst performance among its peers on the SHFE this morning with its most-traded November contract dropping to 137,860 yuan ($19,437) per tonne as at 9.47am Shanghai time, down by 510 yuan per tonne from Friday’s close of 138,370 yuan per tonne.

Nickel came under additional pressure following fresh inflows at SHFE-approved warehouses last week. Deliverable SHFE nickel stocks rose by 985 tonnes - or 4.7% - to 22,171 tonnes as of September 20.

Other highlights

  • Tin was the outperformer of the SHFE base metals this morning, with the metal’s most-traded January contract climbing to 137,640 yuan per tonne as at 9.47am Shanghai time, up by 750 yuan per tonne from Friday’s close of 136,890 yuan per tonne.
  • In European data on Friday, the German producer price index (PPI) decreased by 0.5% in August compared with the prior month, which is worse than the flat reading that had been forecast.
  • In data on Monday, a basket of purchasing managers’ index (PMI) releases for the manufacturing and services sectors from France, Germany and the US will be noteworthy.
  • In addition, Bank of England Monetary Policy Committee member Silvana Tenreyro, European Central Bank President Mario Draghi and US Federal Open Market Committee member John Williams are speaking.
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