LIVE FUTURES REPORT 28/01: SHFE base metals prices supported by weak dollar, improved risk appetite; tin softens

Base metals prices on the Shanghai Futures Exchange were broadly up during Asian morning trading on Monday January 28, with the complex gaining support from a weak US currency and improved risk appetite in the market.

Risk markets have received a boost from news at the end of last week that the partial US government shutdown, which began on December 22, 2018, has come to an end temporarily, according to ANZ Research.

US President Donald Trump announced last Friday that he and congressional leaders had reached a deal to reopen the federal government until February 15.

But threats from Trump that he would resume the shutdown on February 15 if his demands for funding to build a wall along the US-Mexico border are not met remain a source of concern for market participants.

“The stopgap spending bill makes no concession for border wall funding, but instead provides time for lawmakers to negotiate. Trump has said that if he doesn’t get a fair deal, he will either use his emergency powers or government will shut down again,” analysts with ANZ Research wrote in a morning note.

Elsewhere, there was fresh optimism in global markets this morning ahead of high-level trade talks this week between China and the United States.

China’s vice premier Liu He will lead a 30-person delegation to Washington on Wednesday and Thursday to meet with US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer, both of whom will head the US delegation.

Providing further support to risk markets this morning was a weaker dollar; the dollar index, at 95.74 as at 9.54am Shanghai time, has slipped below the psychological level of 96. At a similar time last Friday, the index had been at 96.51.

As a result of this improved sentiment in the market, base metals prices were predominantly up during early morning trading on Monday. Copper was the stand-out performer amongst its peers, with the red metal’s most-traded March contract climbing to 47,780 yuan ($7,079) per tonne as at 9.57am Shanghai time, up by 480 yuan or 1% from Friday’s close.

Gains in SHFE aluminium prices were more moderate compared with its peers, with the metal likely coming under pressure from news overnight that the US had lifted sanctions against Russian aluminium producer UC Rusal.

Tin was the lone SHFE metal to record a loss this morning, the metal’s price likely coming under pressure from the large delivery of tin into London Metal Exchange warehouses in Singapore last Friday, alleviating concerns of tightening supply.

Tin’s most-traded May contract on the SHFE dropped to 147,730 yuan per tonne as at 9.57am Shanghai time, down by 1,060 yuan or 0.71% from last Friday’s close.

“The Chinese physical market remains untouched due to abundant supply (with the domestic refined market currently oversupplied) and the expected slowdown in demand ahead of the Lunar New Year (February 5),” Fastmarkets research analyst Boris Mikanikrezai said.

Meanwhile, the World Bureau of Metal Statistics (WBMS) estimates the global refined tin market was in a deficit of 1,370 tonnes in November 2018, lifting the cumulative deficit for January-November 2018 to 13,440 tonnes, which compares with a deficit of 16,450 tonnes over the same period in 2017.

According to the WBMS, the Chinese refined tin market switched to a surplus of 3,540 tonnes in the first 11 months of 2018 after being in a deficit of below 1,000 tonnes in the corresponding period of 2017.

Elevated tin stocks at SHFE-approved warehouses are a further drag on prices for the metal; tin stocks at SHFE-listed warehouses totaled 8,240 tonnes on January 25, up by 78.7% from 4,612 tonnes roughly the same time a year ago.

Base metals prices

  • The SHFE March copper contract moved up by 480 yuan per tonne to 47,780 yuan per tonne.
  • The SHFE March aluminium contract inched up by 30 yuan per tonne to 13,550 yuan per tonne.
  • The SHFE March zinc contract climbed by 200 yuan per tonne to 21,810 yuan per tonne.
  • The SHFE March lead contract gained by 125 yuan per tonne to 17,840 yuan per tonne.
  • The SHFE May tin contract fell by 1,060 yuan per tonne to 147,730 yuan per tonne.
  • The SHFE May nickel contract increased by 910 yuan per tonne to 95,400 yuan per tonne.

Currency moves and data releases

  • The dollar index was down by 0.07% at 95.74 as at 9.56 am Shanghai time.
  • In equities, the Shanghai Composite went up by 0.68% to 2,619.41 as at 10.45 am Shanghai time.
  • In a light day for data last Friday, the German Ifo business climate index for January came in at 99.1, missing an expected reading at 100.7 and down from 101 previously.
  • Elsewhere in Europe, the United Kingdom’s high street lending figures for the same period were recorded at 38,800, short of the expected 38,900 level and down from 39,200 previously. The country’s CBI realized sales indicator stood at 0 in January, up from -13 in the prior month.
  • The economic agenda is similarly light on Monday with M3 money supply and private loans data from the European Union and China’s CB leading index of note.
  • In addition, European Central Bank president Mario Draghi and Bank of England governor Mark Carney are speaking.

London Metal Exchange, base metals prices

Shanghai Futures Exchange, base metals prices

Changjiang spot prices, base metals prices