LIVE FUTURES REPORT 29/01: SHFE base metals consolidate negatively amid uncertainties on upcoming US-China trade talks, tin bucks the trend

Most base metals prices on the Shanghai Futures Exchange saw a slightly negative bias during Asian morning trading on Tuesday January 29 as market participants awaited the outcome of the US-China trade talks on January 30-31, although tin bucked the trend amid ongoing supply concerns.

Among the complex, tin was the only metal that managed to record some gains.

“Investors are faced with a plethora of market moving events this week. US-China trade talks, an escalating crisis in Venezuela and the Fed policy statement should keep commodity prices volatile,” ANZ Research said in a morning note.

“The FOMC will this week, in its first press conference for the year, highlight that the committee is both patient and flexible. Its guidance will also sound more dovish, matching the tone already expressed in members’ speeches. The market will be listening for hints on the Fed’s Balance sheet strategy, as hopes for a more conservative pace of unwind have buoyed markets in recent sessions,” it added.

The resultant firmer dollar index added further pressure to the bases metal prices on the SHFE, with the dollar index climbing by 0.06% to 95.78 as at 09.30am Shanghai time.

Besides the constraints from the stronger dollar, alumunium also came under the pressure from the latest news that the United States had lifted sanctions against Russian aluminium producer UC Rusal.

“We will stick with our view that the aluminium complex faces many challenges, such as the potential influx of UC Rusal metals and higher Chinese production at time when global consumption remains highly uncertain,” Fastmarkets research analyst Andy Farida said.

The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced late on January 27 that it had removed sanctions against Rusal and En+, following an earlier notification submitted to US Congress on December 19, 2018.

“The US lifting sanctions against UC Rusal alleviates the expected supply pressure for primary aluminum, and thus has weighed on the metal’s price,” analyst with Citic Futures Research said in a morning note.

Rio Tinto’s announcement that it is to raise its alumina output target in 2019 to 8.1-8.4 million tonnes added further pressure to  the aluminium price, according to Guotai Junan Futures Research.

As a result, aluminum’s most-traded March contract on the SHFE dropped to 13,455 yuan ($1,995) per tonne as at 9.33am Shanghai time, down by 30 yuan, or 0.22%, from Monday’s close.

The metal’s price was also capped by the increase in the aluminium stocks on the SHFE over the past week, with aluminum inventories at SHFE-listed warehouses totalling 688,821 tonnes on January 25, up by 822 tonnes from the previous week’s 687,999 tonnes despite recording a reduction of 12.9% compared with the corresponding period a year ago.

Tin outperformed its peer complex on the SHFE on Tuesday morning, with the metal’s most-traded May contract on the SHFE climbing to 148,430 yuan per tonne as at 9.33am Shanghai time, up by 730 yuan or 0.49% from Monday’s close.

“Providing support to the metal’s price is the persistent supply tightness stemming from the disruption in Myanmar tin ore production,” Citic Futures Research said.

“We believe that tin prices are likely to become more volatile in the coming months due to potential large fluctuations in exchange inventories but the trend in tin prices should remain upward, reflecting tight fundamentals from continued Indonesian supply tightness,” Fastmarkets research analyst Boris Mikanikrezai said.

“We peg the [refined tin] deficit at 7,000 tonnes for the whole of 2018, reflecting a 2.6% increase in refined production and a 1.5% increase in consumption, all on a yearly basis,” he added.

Base metals prices

  • The SHFE March copper contract edged down by 40 yuan per tonne to 47,500 yuan per tonne.
  • The SHFE March aluminium contract declined by 30 yuan per tonne to 13,455 yuan per tonne.
  • The SHFE March zinc contract fell by 35 yuan per tonne to 21,775 yuan per tonne.
  • The SHFE March lead contract nudged down by 5 yuan per tonne to 17,700 yuan per tonne.
  • The SHFE May tin contract climbed by 730 yuan per tonne to 148,430 yuan per tonne.
  • The SHFE May nickel contract slid by 140 yuan per tonne to 94,910 yuan per tonne.

Currency moves and data releases

  • The dollar index was up by 0.06% at 95.78 as at 9.30 am Shanghai time.
  • In equities, the Shanghai Composite fell by 0.14% to 2,593.44 as at 09.53am Shanghai time.
  • In data on Monday, the EU’s M3 money supply year on year for the January period was 4.1%, up from 3.7% previously. Meanwhile, EU private loans year-on-year for the January period were unchanged at 3.3%.
  • In addition, European Central Bank president Mario Draghi and Bank of England governor Mark Carney were speaking on Monday.
  • In data on Tuesday, the US December retail inventories and trade balance numbers are due to out. Meanwhile, the US and France are also to release their January consumer confidence indices.
  • Elsewhere, Giovanni Tria, the Italian minister of finance, will deliver a speech in Peterson Institute for International Economics in Washington.