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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.
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