LIVE FUTURES REPORT 27/08: SHFE copper prices find support from weaker dollar, improved fundamentals; others mixed

Base metals prices on the Shanghai Futures Exchange gave a mixed performance during Asian morning trading on Monday August 27, with copper, zinc and tin moving up while the others were little changed to weaker.

Continued weakness in the dollar provided broad-based support to the SHFE base metals, while copper prices were further buoyed by an improved fundamental backdrop.

The most-traded October copper contract on the SHFE stood at 48,750 yuan ($7,159) per tonne as at 10.45am Shanghai time, up by 0.5% or 240 yuan per tonne from last Friday’s close.

The dollar index, at 95.08 as at 11.18am Shanghai time, continues to retreat from its 2018 high of 96.99 reached on August 15.

The currency came under pressure following a speech from US Federal Reserve Chairman Jerome Powell last Friday in which he expressed gradual US interest rate increases remain appropriate.

“I see the current path of gradually raising interest rates as the [Federal Open Market Committee’s] approach to taking seriously both of these risks,” Powell said. “While inflation has recently moved up near 2%, we have seen no clear sign of acceleration above 2%, and there does not seem to be an elevated risk of overheating.”

In addition, an announcement from the People’s Bank of China last Friday that Chinese banks would resume using a counter-cyclical factor when calculating the daily reference rate of the yuan against the dollar to counter the bias against a weaker yuan sparked further selling of long dollar positions, according to ANZ Research.

The red metal also benefitted from improved fundamentals; copper stocks at SHFE-listed warehouses fell 5.5% or 8,486 tonnes last week to 146,590 tonnes last Friday. Stocks have fallen for eight consecutive weeks, with the last increase recorded in the week ended June 29, when stocks totaled 263,968 tonnes.

Higher copper premiums in China were also supportive: Metal Bulletin assessed the premium for copper cathode on a cif Shanghai basis at $69-88 per tonne on August 21. This was the highest level since late October 2016 and compared with $65-82 per tonne a week earlier.

Ongoing supply-side issues also continue to support copper prices with an unexpected outage at BHP’s Olympic Dam smelter in South Australia last week, while Sterlite’s Tuticorin smelter in the southern Indian state of Tamil Nadu remains closed.

The Tuticorin smelter is India’s largest and has capacity for 400,000 tonnes per year of refined copper. But the Tamil Nadu government ordered it to be shut permanently in late May.

Elsewhere, gains were seen in zinc and tin – albeit marginally in the latter – while lead was unchanged and nickel and aluminium fell.

The London Metal Exchange is closed on Monday due to a bank holiday in the United Kingdom.

Base metals prices

  • The SHFE October zinc contract rose 105 yuan per tonne to 21,175 yuan per tonne.
  • The SHFE January tin contract price increased 170 yuan per tonne to 145,960 yuan per tonne.
  • The SHFE November nickel contract price dropped 2,040 yuan per tonne to 108,060 yuan per tonne.
  • The SHFE October aluminium contract price was down 55 yuan per tonne to 14,735 yuan per tonne.
  • The SHFE October lead contract price was flat at 18,325 yuan per tonne.

Currency moves and data releases

  • The dollar index was down 0.08% to 95.08 as at 11.18am Shanghai time.
  • In other commodities, the Brent crude oil spot price was up 0.11% to $75.68 per barrel as at 10.47am Shanghai time.
  • In equities, the Shanghai Composite was up 1.43% to 2,768.40 as at 11.30am Shanghai time.
  • In US data on Friday, durable goods orders declined by 1.7% on a monthly basis in July, compared with an expected 0.7% decline.
  • The economic agenda is light today with only Germany’s Ifo business climate of note.
  • Highlights for the rest of the week include the latest estimate for the United States’ gross domestic product growth for the second quarter on Wednesday as well as its core PCE price index on Thursday, while China’s manufacturing and non-manufacturing purchasing managers’ indices are due Friday.