LIVE FUTURES REPORT 28/10: SHFE base metals broadly higher amid easing Sino-US trade tensions, Zn up 2%

Base metals prices on the Shanghai Futures Exchange were up across the board during Asian morning trading session on Monday October 28, with overall market sentiment buoyed by the positive progress in the trade negotiation between China and the United States, the world’s two largest economies.

“Risk-on sentiment followed positive news on progress of phase one of the US-China trade deal…… Easing trade tensions and a broadly risk-on market pushed the commodities prices higher across the sectors,” Cherelle Murphy, senior analyst at Australia and New Zealand Banking Group (ANZ), said in a morning note.

This lent broad support to the base metals on the SHFE this morning, which registered gains ranging from 0.07% for December-nickel and 1.9% for December-zinc.

Zinc outperformed its peers on the SHFE this morning, tracking the trend on the London Metal Exchange last Friday.

The galvanizing metal’s most-traded December contract stood at 19,030 yuan ($2,693) per tonne as at 9.34am Shanghai time, up by 355 yuan – or 1.9% – from last Friday’s close of 18,675 yuan per tonne.

The evident strength in the galvanizing metal’s performance came amid the supportive backdrop of its fundamentals.

“Global exchange inventories have decreased by 15% since the close of 2018, indicating a tightening refined zinc market,” Andy Farida, Fastmarkets’ research analyst, said.

According to recent International Lead and Zinc Study Group (ILZSG) data, global mined output of zinc concentrate rose by 2.05% year on year over the first eight months of 2019. Over the same period, global usage outpaced supply by 119,000 tonnes.

Regionally, zinc stocks in the SHFE-approved warehouses recorded a drop of 4,485 tonnes week on week to 64,075 tonnes as of October 25.

Despite a higher zinc price seen this morning, some market analysts remained wary of existent challenges for the metal in the long term.

“That said, the zinc complex faces several challenges in the coming months which could limit the rebound momentum. China’s domestic refined zinc output remained strong despite smelter outages seen over the June-August period,” Farida added.

Other highlights

  • The broad strength of base metals on the SHFE this morning comes despite a stronger US currency.
  • The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, w up by 0.04% to 97.87 as at 9.35am Shanghai time.
  • In data from the EU on Friday, the Germany’s Information and Forschung (Ifo) business climate reading for thase October period was unchanged at 94.6.
  • The economic calendar is relatively light on Monday with only the October goods trade balance, premilimary wholesale inventories month-on-month changes from the US, German import prices month-on-month changes and M3 money supply from the European Central Bank of note.