LIVE FUTURES REPORT 25/03: SHFE base metals prices mixed; Cu continues to run higher

Base metals prices on the Shanghai Futures Exchange were on divergent paths during the morning trading session on Wednesday March 25, with copper gaining the most on improved risk sentiment and recent production cuts.

There has been some improvement in risk appetite following recent stimulus measures from the United States; on Monday, the Federal Reserve announced a new plan that includes purchasing unlimited quantities of Treasury bonds and mortgage-backed securities, direct purchases of corporate bonds, and direct loans to companies.

“Some revival in risk appetite was seen in the commodity market following the unprecedented fiscal support measures announced by the US on Monday,” Felicity Emmett, analyst from ANZ Research, said in a morning note.

At the same time, markets are also being supported by reports that the US Congress is close to a deal on a roughly $2 trillion stimulus package to combat the novel coronavirus (nCoV 2019) pandemic.

In the base metals, this morning’s outperformer, copper, has found additional support on news that several key producers had started cutting production.

“On the supply side, mines in Peru and Chile have already reduced their output although their decisions are not driven by margin pressures – it may take time before mines decide to materially cut production. Recent cuts are due to quarantine measures implemented by governments,” Boris Mikanikrezai, research analyst at Fastmarkets, said.

Meanwhile, US-based miner Freeport-McMoRan has declared force majeure on near-term sales agreements for its Cerro Verde mine in Peru, according to documents seen by Fastmarkets.

The most-traded June copper contract stood at 39,040 yuan ($5,520) per tonne at the end of the morning trading session on Wednesday, up by 1.9% or 730 yuan per tonne from Tuesday’s close of 38,310 yuan per tonne.

Gains were also seen in June tin at 114,550 yuan per tonne (+0.5%) and May aluminium at 11,490 yuan per tonne (+0.5%). June nickel was little changed at 91,710 yuan per tonne, up by just 20 yuan per tonne from the previous day’s close.

In terms of losses, May zinc was down by 0.8% to 14,775 yuan per tonne while May lead dipped by 0.1% to 13,445 yuan per tonne.

Other highlights

  • The Shanghai Composite Index was up by 1.57% at 2,765.12 as at 11.30 am Shanghai time.
  • The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, fell by 0.13% to 101.51 as at 11.30am Shanghai time.
  • In data on Tuesday, Germany’s flash manufacturing purchasing managers’ index (PMI) for March was better than expected at 45.7, beating the forecast reading of 40.1. Germany’s flash services PMI for the same month was well below analysts’ forecasts however, coming in at 34.5 against the expected 43.0.
  • The European Union’s flash manufacturing PMI stood at 44.8 in March, beating the expected reading of 40.1 but down from 49.2 previously. The EU’s flash services PMI disappointed at 28.4, well below the expected 40.0.
  • The United Kingdom’s flash manufacturing PMI surprised to the upside at 48.0 in March, beating the expected reading of 45.1 but down from 51.7 previously. The UK’s flash services PMI fell more than expected to 35.7, well below the forecast 45.0.
  • The US’ flash manufacturing PMI stood at 49.2 in March, down from 50.7 previously but better than the expected 45.1. The flash services PMI disappointed at 39.1 however, undershooting the 44.1 that had been forecast.
  • In data on Tuesday, the UK’s consumer price index and Confederation of British Industry (CBI) realized sales are due, while US releases include durable goods orders and crude oil inventories.