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The dollar remains in relatively high ground which is putting downward pressure on the SHFE base metals this morning.
The dollar index stood at 96.02 as at 9.30am Shanghai time, which is up from 95.73 at roughly the same time on Monday. It is also significantly higher than the index’s recent low of 94.78, reached on October 16.
Ongoing trade tensions between China and the United States also continued to dampen market sentiment and depress prices.
“US President Trump’s economic advisor accused China of refusing to engage on trade issues. He also said it will take some time for the tariffs to have an impact, suggesting the dispute is unlikely to end any time soon,” ANZ Research said.
Concerns that a prolonged spat between the world’s two largest economies will hurt global economic growth largely wiped out the positive market sentiment inspired by a rally in Chinese equity markets on Monday.
On Monday, the benchmark Shanghai Composite Index rallied 4.1% following a rollout of supportive measures by Chinese policymakers to ease concerns about the ongoing sell-off in domestic stocks.
“China’s State Council announced overnight that it would support bond financing by private firms with central bank funding, though details were scant. The central bank also announced a higher quota for relending and rediscounting to support private sector lending,” ANZ Research added.
The stronger US currency along with sufficient domestic supply in China combined to push copper prices lower, with the metal’s most-traded December contract on the SHFE declining to 50,340 yuan ($7,252) per tonne as at 9.29am Shanghai time, down by 170 yuan per tonne from Monday’s close.
“Production at domestic refineries [in China] increased by around 20,000-30,000 tonnes this month and volumes of imported copper also flowed into the Chinese market. As a result, stocks of refined copper [in the country] have steadily increased, which is putting downward pressure on prices,” Citic Futures Research noted on Tuesday.
Chinese refined copper production totaled 764,000 tonnes in September, an increase of 10.4% year on year, while total production over January-September saw an 11.2% year-on-year rise to 6.61 million tonnes, according to data released by China’s National Bureau of Statistics on Monday.
The rest of the base metals were similarly weaker, barring tin and zinc – the latter of which is holding up surprisingly well considering the vast inflow of zinc into SHFE sheds at the end of last week.
Deliverable zinc stocks at SHFE sheds rose by 10,106 tonnes or 23.3% last week to 53,479 tonnes as of October 19.
SHFE zinc, tin prices rise, others weaken
Currency moves and data releases