LIVE FUTURES REPORT 28/09: SHFE base metals prices mixed on dollar strength, book squaring

Wednesday’s interest rate increase by the US Federal Reserve has bolstered the dollar, with the index at 94.98 as at 10.11 am Shanghai time. This compares with 94.28 at roughly the same time on Monday.

Moreover, with the looming Golden Week holiday in China next week, many investors were heard to be closing their positions toward the end of this week.

“A lot of traders will be generally selling this week to reduce their risk when they start trading in the fourth quarter,” a China-based analyst said.

Additionally, the prospect of reduced demand during China’s weeklong National Day break from October 1 has also dented sentiment in the base metals markets.

As a result, the SHFE base metals complex was split into two camps with weakness seen in aluminium, copper and nickel prices, while the rest were in positive territory.

Nickel was the worst performer of its peers; the metal’s most-traded November contract fell to 103,360 yuan ($15,012) per tonne as at 10.11am Shanghai time, down by 0.7% or 770 yuan per tonne from Thursday’s closing price.

Conversely, lead was the star performer during trading on Friday morning, with the metal’s most traded November contract climbing 0.8% or 145 yuan per tonne to 17,985 yuan per tonne.

Lead prices were likely supported by the relatively strong performance witnessed on the London Metal Exchange on Thursday, where the exchange’s three-month lead price ended the day 1.2% higher at $2,010 per tonne. But LME prices remain in low ground, hovering near the $2,000-per-tonne support level.

Additionally, SHFE lead prices could be finding support from declining on-exchange stock levels – indicative of a tightening market, according to an analyst with Guotai Junan Futures.

SHFE lead stocks are down significantly from the beginning of the year; stocks stood at 14,555 tonnes at the end of last week, down 65% from the 41,816 tonnes recorded on January 5.

LME lead stocks have exhibited a similar trend through this year, albeit to a more modest extent. LME lead stocks totaled 116,300 tonnes on Thursday, down 18% from 142,225 tonnes on January 2.

The strength in lead dragged sister-metal zinc higher, while tin also registered slight gains this morning.

Base metals prices

• The SHFE November copper contract slid 100 yuan to 50,030 yuan per tonne.
• The SHFE November aluminium contract fell 55 yuan per tonne to 14,305 yuan per tonne.
• The SHFE November zinc contract rose 120 yuan per tonne to 21,690 yuan per tonne.
• The SHFE January tin contract increased 580 yuan per tonne to 148,530 yuan per tonne

Currency moves and data releases

• The dollar index edged down 0.03% to 94.98 as at 10.11 am Shanghai time.
• In other commodities, the Brent crude oil spot price inched up 0.13% to $81.39 per barrel as at 10.11 am Shanghai.
• In equities, the Shanghai Composite rose 0.73% to 2,812.62 as at 10.47 am Shanghai time.
• In US data on Thursday, final gross domestic product (GDP) was at 4.2%, in line with expectations, while core durable goods orders disappointed at 0.1% – 0.4% had been expected.
• US weekly unemployment claims came in above estimates at 214,000.
• The economic agenda is busy today with European releases that include French consumer spending and preliminary consumer price index (CPI), Germany’s unemployment change, Spanish flash CPI, the United Kingdom’s current account and final GDP, the European Union’s headline and flash core CPI estimates and Italian preliminary CPI.
• In US data on Friday, there is the core PCE price index, personal spending, personal income, the Chicago PMI and the University of Michigan’s consumer sentiment and inflation expectations.