LIVE FUTURES REPORT 25/10: SHFE base metals prices broadly down; lead outperforms on tight supply

Base metals prices on the Shanghai Futures Exchange were mostly down during Asian morning trading on Thursday October 25 after the dollar strengthened once more, with only lead prices rising due to continued supply tightness in China.

The dollar index gained ground on Thursday after the US Federal Reserve’s latest Beige Book report that overall economic activity in the United States expanded at a “modest to moderate” pace.

The index stood at 96.27 as at 9.33am Shanghai time after a low of 95.90 on Wednesday.

Sentiment in the base metals market has also been dented by a wave of selling that hit Asian stock markets on Thursday morning following a sell-off in western markets on Wednesday that wiped out top US indices’ entire gains for 2018.

“The [Dow Jones Industrial Average] saw a 600-point loss as the new home sales numbers came in way below expectations and the tech sector wobbled once again… Asian equities have followed along this morning with the main indexes down between 1.5-3% – pretty much mirroring the Dow’s drop of 2.5%. The injection of liquidity funds and bonds by the [People’s Bank of China] has not had time to make effects felt and the Shanghai Composite is also following along at a more modest-1.4%,” Malcolm Freeman of Kingdom Futures said.

“To put it bluntly, no news is the current news and until there is actual real news that markets can react to and companies make long-term decisions, we will continue to exist in this volatile non-net directional state that the metals have been in for some months,” Freeman added.

Copper prices fell heavily on the SHFE this morning, with the red metal’s most-traded December contract falling to 49,420 yuan ($7,119) per tonne as at 9.30am Shanghai time, down by 910 yuan per tonne from Wednesday’s close.

SHFE copper prices are contending with the additional headwinds of rising stock levels and elevated import volumes into China.

Deliverable copper stocks at SHFE sheds rose by 15,089 tonnes or 12% to 140,789 tonnes in the week ended October 19.

“China’s unwrought copper and copper products imports reached 521,000 tonnes in September, according to preliminary Chinese customs data – the highest since March 2016. Total imports for the January-September period increased by 16.1% year on year to 3.99 million tonnes,” Fastmarkets analyst James Moore said.

Lead was the sole metal on the SHFE to record a gain this morning, outperforming its peers against the backdrop of supply tightness in China, with the metal’s most-traded December contract up by 75 yuan per tonne to 14,180 yuan per tonne as at 9.30am Shanghai time.

“In China, [lead] smelters are struggling due to environmental inspections as well as limited growth in raw material supplies. Chinese authorities have announced a 10% import tariff on lead concentrate from the United States amid increasing trade tensions,” Moore added.

Lead stocks in SHFE warehouses, at 11,081 tonnes as of October 19, are down by 73.5% from the 41,816 tonnes stored at the beginning of the year.

Base metals prices

  • The SHFE December copper contract declined by 910 yuan per tonne to 49,420 yuan per tonne.
  • The SHFE December aluminium contract eased 70 yuan per tonne to 14,180 yuan per tonne.
  • The SHFE December zinc contract ticked down 355 yuan per tonne to 22,185 yuan per tonne.
  • The SHFE December lead contract was up 75 yuan per tonne to 18,225 yuan per tonne.
  • The SHFE January tin contract dropped by 220 yuan per tonne to 147,580 yuan per tonne.
  • The SHFE January nickel contract slipped 2,600 yuan per tonne to 100,630 yuan per tonne.

Currency moves and data releases

  • The dollar index was down by 0.09% at 96.27 as at 9.31am Shanghai time.
  • In other commodities, Brent crude oil was down by 0.28% at $75.36 per barrel.
  • In equities, the Shanghai Composite Index was at 2,560.50 as at 9.56am Shanghai time.
  • In EU data on Wednesday, the flash manufacturing purchasing managers’ index (PMI) for the September-October period came in at 52.1, down from the previous figure of 53.2 and short of the expected figure of 53. The EU’s flash services PMI for the same period came in at 53.3, missing the expected print at 54.5 and down from the previous reading of 54.7.
  • In US data on Wednesday, the August house price index came in as expected with a 0.3% month-on-month gain. Flash manufacturing PMI stood at 55.9, while new home sales disappointed with 553,000 homes sold, below the 627,000 forecast. Crude oil inventories registered a gain of 6.3 million barrels, nearly double the forecast of a 3.6 million-barrel increase.
  • In data today, the European Central Bank will set its financing rate followed by a press conference.
  • In US data on Thursday, there is the durable goods orders, goods trade balance, preliminary wholesale inventories, unemployment claims and pending home sales.
  • In addition, US Federal Open Market Committee members Richard Clarida and Loretta Mester are speaking.

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