LIVE FUTURES REPORT 24/08: SHFE base metals prices all up; zinc, lead outperform

On Thursday, the United States and China exchanged further blows in their tit-for-tat trade spat with the two countries implementing a fresh round of tariffs on one another to the tune of $16 billion. This brings the total amount of goods flowing between China and the US subject to tariffs up to $106 billion.

Yet despite the elevated tensions, buying was seen across the SHFE complex this morning with buyers seemingly more focused on the fundamental backdrop for the metals rather than the macroeconomic one.

“There is definitely evidence that trade buyers are beginning to price in metals generally amid a scenario of falling stocks and rising physical premiums,” Kingdom Futures director and chief executive officer Malcolm Freeman told Metal Bulletin.

Lead was the outperformer for a second day in a row with the metal’s most-traded October contract rising to 18,145 yuan per tonne as at 10.14am Shanghai time, up by 330 yuan per tonne or 1.9% from Thursday’s close. The price for the heavy metal has shown a steady uptrend since dipping to a low of 17,245 yuan per tonne on August 17, its lowest since June 2017.

“In China, smelters are struggling due to tight environmental inspections as well as limited growth in raw material supplies,” Metal Bulletin analyst James Moore said.

Sister-metal zinc was similarly strong this morning, helped by exceptionally low stocks on the SHFE; stocks totaled 34,930 tonnes on August 17 – their lowest since November 2007.

Zinc’s most-traded October contract on the SHFE rose to 20,840 yuan per tonne, up by 1.1% or 230 yuan per tonne compared with Thursday’s close.

“The zinc arbitrage window has opened recently which might help alleviate tightness in the spot market, but the higher premiums should continue to support prices for zinc at these levels,” a Shanghai-based analyst told Metal Bulletin.

The arbitrage window for importing zinc into China has been largely open since the start of August, with profits reaching as high as $111.99 per tonne on Wednesday after dipping to a marginal loss of $2.79 per tonne on August 9, according to Metal Bulletin’s calculations.

Base metal prices

• The SHFE October aluminium contract moved up 85 yuan per tonne to 14,715 yuan per tonne.
• The SHFE January tin contract gained 230 yuan per tonne to 145,210 yuan per tonne.
• The SHFE November nickel contract rose 490 yuan per tonne to 109,870 yuan per tonne.
• The SHFE copper October contract rose 380 yuan per tonne to 48,370 yuan per tonne.

Currency moves and data releases

• The dollar index was down by 0.02 % at 95.64 as at 10.13am Shanghai time.
• In other commodities, Brent crude oil was up 0.23 % at $74.87 per barrel as at 10.13 am Shanghai time.
• In equities, the Shanghai Composite dropped 0.35 % to 2,714.98 as at 11.35 am Shanghai time.
• In data on Thursday, the European Union’s flash manufacturing purchasing managers’ index (PMI) fell to 54.6 in August, from 55.1 previously. The services PMI increased to 54.4 in the same comparison, which was up slightly from 54.2 in July.
• In the US, the flash manufacturing and services PMI both fell short of expectations with readings of 54.5 and 55.2 respectively. New home sales also disappointed with sales falling 1.7% to a seasonally adjusted annual rate of 627,000 in July, while initial jobless claims fell 2,000 to 210,000 in the week ended August 18.
• The economic agenda is fairly light today with durable goods orders from the US of note.
• In addition, US Federal Reserve chairman Jerome Powell is delivering a speech at day two of the Jackson Hole Symposium in the US state of Wyoming.