LIVE FUTURES REPORT 25/10: SHFE zinc price drops 0.9%; rest of complex little changed to down

Base metals traded on the Shanghai Futures Exchange were broadly down during the morning trading session on Friday October 25, with the complex pressured by disappointing manufacturing data released on Thursday and a recovery in the dollar index.

Zinc was the worst performer of the SHFE base metals in percentage terms. The galvanizing metal’s most-traded December contract stood at 18,705 yuan ($2,646) per tonne as at 10.35am Shanghai time, down by 175 yuan – or 0.9% – from Thursday’s close of 18,880 yuan per tonne.

The only other standout performer this morning was December lead, which was up by 5 yuan per tonne from its previous close at 16,535 yuan per tonne. The rest of the complex retreated against an unfavorable backdrop of weak manufacturing data and stronger US currency.

The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, stood at 97.70 as at 11.52am Shanghai time. This compares with a reading of 97.42 at a similar time on Thursday.

The firmer dollar is acting as a headwind for the base metals, while weaker-than-expected data on Thursday is adding to the risk-off tone in the market this morning. See other highlights for details on Thursday’s data releases.

In zinc, a weaker fundamental outlook is also pressuring prices for the galvanizing metal.

“The majority of market participants are bearish in regard to zinc’s outlook, with weaker demand in most countries. Major economies in Europe are in recession, while economic growth in large Asian countries like China and India has slowed,” a market source told Fastmarkets.

“Meanwhile, supply of zinc concentrates is sufficient and profits for zinc production are good, so this should lead to a further ramp-up in zinc output in 2020,” the source added.

China’s domestic refined zinc output remains strong despite smelter outages seen over the June-August period. Data released by the country’s National Bureau of Statistics shows that zinc output rose by 18.9% year on year to 548,000 tonnes in September.

Other highlights

  • The Shanghai Composite Index was down by 0.31% at 2,940.61 as at 11.30 am Shanghai time.
  • In European data on Thursday, Germany’s flash manufacturing purchasing manager’s index (PMI) for the October period was recorded at 41.9, down slightly from the expected 42 and remaining in contraction territory. The European Union’s flash manufacturing PMI over the same period was 45.7, coming in below the forecast 46.1.
  • US data on Thursday was mixed; the flash manufacturing PMI unexpectedly rose to 51.5 in October from 51.1, beating an expected fall to 50.7. Durable goods orders were weaker than expected, however, dropping by 1.1% in September, more than the forecast 0.5% decline.
  • It is a light day for data on Friday with Germany’s Information and Forschung (Ifo) business climate reading and the revised indicators of consumer sentiment and inflation expectations from the University of Michigan of note.