LIVE FUTURES REPORT 28/12: SHFE base metals prices broadly up on softer dollar; Cu, Al dip

The dollar index continued its downward trajectory this morning and recorded a 0.18% decline to 96.39 as at 10.20am Shanghai time. This is down from a reading of 96.80 at roughly the same time on Thursday.

The weaker US currency has brought with it improved risk sentiment, which has provided the support for SHFE base metals prices, barring those for aluminium and copper, to push upward. Gains, however, were marginal due to a challenging macroeconomic backdrop which continues to keep investors cautious.

Aluminium continues to contend with declining raw material prices, which are offsetting any positivity effects stemming from recently announced output cuts from Chinese smelters.

The most-traded February aluminium contract on the SHFE slid to 13,585 yuan ($1,975) per tonne as at 10.20am Shanghai time, down by 65 yuan per tonne from Thursday’s close.

Selling pressure also continues to build against the light metal following the decision by the US Treasury Department to remove sanctions against Russian aluminium producer UC Rusal, with the three-month aluminium price on the London Metal Exchange crashing below the $1,900-per-tonne level on Thursday.

“The capacity cuts in the Chinese aluminium industry weren’t extend any further and raw material prices, such as those for alumina, continue to decline. Meanwhile, the LME aluminium price hit a fresh 2018 low yesterday and this has sent ripples to SHFE aluminium prices,” Citic Futures said in a morning note.

The LME aluminium’s three-month price decreased $41.50 per tonne to close at $1,851.50 per tonne on Thursday, the lowest level since July 2017.

Alumina prices in China have trended downward since mid-November with Fastmarkets MB assessing the price for Chinese alumina, delivered duty paid, at 2,900-2,950 yuan per tonne on December 20, which is down from 3,150-3,200 on November 15.

Copper was similarly weaker as it ignored a softer dollar, with broader concerns continuing to weigh on the red metal. The most-traded February copper contract on the SHFE fell 100 yuan per tonne to 48,180 yuan per tonne.

“The macro environment shows continuous weakening in emerging markets, while China’s economy faces downward risks. Both of these point to a bearish financial market. In addition, a lack of spot activity in the copper market has also depressed [futures] prices temporarily,” Guotai Junan Futures said.

Base metals prices

• The SHFE May nickel contract was up by 340 yuan per tonne to 88,300 yuan per tonne.
• The SHFE February zinc contract was up by 20 yuan per tonne to 20,755 yuan per tonne.
• The SHFE February lead contract rose by 80 yuan per tonne to 18,010 yuan per tonne.
• The SHFE May tin contract moved up by 70 yuan per tonne to 144,550 yuan per tonne.

Currency moves and data releases

• The dollar index was down by 0.18% at 96.39 as at 10.20am Shanghai time.
• In other commodities, the Brent crude oil spot price was down by 0.59% at $54.47 per barrel as at 10:33am Shanghai time.
• In equities, the Shanghai Composite Index was up by 0.68% at 2,499.92 as at 10.37am Shanghai time.
• In US data on Thursday, the Conference Board’s consumer confidence dropped to 128.1 in December from 136.4 in November. US weekly unemployment claims came in at 216,000, slightly below the forecast 217,000.
• In US data today, the Chicago purchasing managers’ index (PMI), pending home sales, natural gas storage and crude oil inventories are due.