LIVE FUTURES REPORT 24/09: LME base metals prices pressured by US-China trade tensions; Chinese markets closed

Three-month base metals prices on the London Metal Exchange were down across the board during early trading on Monday September 24, with a ratcheting up of global trade tensions sapping the positivity seen in the market last week.

This morning’s weakness comes after a strong close from the LME base metals last Friday, when copper in particular gave a robust performance to end the day more than 4% higher at $6,363 per tonne.

The base metals’ weaker showing this morning follows China’s decision on Saturday to withdraw from planned trade talks with the US and the imposition of fresh tariffs between the two nations on Monday.

US President Donald Trump’s latest and biggest round of tariffs on Chinese goods to the tune of $200 billion came into effect today, with the duties starting at 10%. These are set to rise to 25% on January 1, 2019, unless the two nations can come to a trade agreement.

China responded in kind by imposing its own tariffs on $60 billion worth of US products.

The market was decidedly bearish in response to the heighted trade tensions, with all of the base metals on the LME reversing the strong gains recorded at the end of last week.

Adding further downward pressure to the base metals was a strong dollar; the dollar index stood at 94.28 as at 10.39am Shanghai time, up from a reading of 93.91 at roughly the same time last Friday.

The three-month LME nickel price led the decline with a 1.5% or $190 per tonne fall to $13,060 per tonne as at 10.39am Shanghai time. This despite the relatively strong fundamentals for the metal.

“Nickel stocks on the London Metal Exchange are trending lower; at 231,024 tonnes, they are down 135,588 tonnes or 37% from 366,612 tonnes at the end of December 2017,” Metal Bulletin analyst James Moore said, adding that currently 23% of stocks are booked for removal.

The other base metals on the LME were similarly weaker in response to the negative macro factors.

“With a rather uninspiring economic calendar today the next trigger could well be the next tweet from President Trump as it is unlikely that he will keep quiet regarding the Chinese response to the proposed trade talks,” Malcolm Freeman of Kingdom Futures said.

In China, the Shanghai Futures Exchange was closed on Monday in observance of the Mid-Autumn Festival.

Other metals down

  • The three-month copper price plummeted $59.50 per tonne to $6,303.50 per tonne
  • The three-month aluminium price slumped $23 per tonne to $2,068 per tonne.
  • The three-month zinc price fell $6 per tonne to $2,490 per tonne.
  • The three-month lead price dipped $1.50 per tonne to $2,037.50 per tonne.
  • The three-month tin price dived $150 per tonne to $18,850 per tonne.

Currency moves and data releases

  • The dollar index rose 0.05% to 94.28 as at 10.39am Shanghai time.
  • In other commodities, the Brent crude oil spot price increased by 1.32% to $79.71 per barrel as at 10.39 am Shanghai.
  • In equities, the Shanghai Composite surged 2.5% to 2,797.48 as at 10.39am Shanghai time.
  • It is a light day for data today with Chinese and Japanese markets closed for holidays. Data of note on Monday includes German Ifo business climate and speech from European Central Bank President Mario Draghi.