LIVE FUTURES REPORT 29/03: SHFE copper prices recover on US-China trade war optimism, expectations of upstream tightness

Copper prices on the Shanghai Futures Exchange rebounded during morning trading on Friday March 29, with the red metal finding support from renewed trade optimism and bullishness arising from potential upstream supply tightness.

The most-traded May copper contract on the SHFE was at 48,680 yuan ($7,226) per tonne as at 10.35am Shanghai time, up by 0.7% or 320 yuan per tonne from the previous day’s close of 48,360 yuan per tonne.

US treasury secretary Steven Mnuchin said overnight that he had a “productive working dinner” in Beijing, sending positive signals to the market over US-China trade negotiations which are set to continue on Friday. This positivity in turn saw investors’ appetite for risk return, resulting in some renewed buying in copper.

In a further bullish development for copper, market participants continue to focus on an apparent tightening of copper concentrate supply in China as evidenced by the recent cutting of treatment and refining charges (TC/RCs) purchase price floors by major Chinese smelters.

China’s 10 biggest copper smelters, which form the Copper Smelter Purchase Team (CSPT), set a TC/RCs purchase price floor of $73 per tonne/7.3 cents per lb for the second quarter of this year at group’s quarterly meeting in Shanghai on Thursday.

The latest price floor marks a 21% decline from the first quarter’s level of $92 per tonne/9.2 cents per lb.

“The Copper Smelter Purchase Team set a treatment charge floor price of $73 [per lb] for the second quarter, down $19 [per lb] from the first quarter, which strengthened market expectations of tightened supply [of concentrate],” analysts with Citic Futures Research said in a morning note.

Meanwhile, optimism toward copper consumption received a boost after Chinese Premier Li Keqiang said China’s economy showed signs of stability amid targeted stimulus support, Cherelle Murphy, analyst at Australia and New Zealand Banking Group (ANZ), said in a morning note.

“We are constructive on copper for the second quarter due to the more favorable seasonal demand and our expectations of a pick-up in Chinese refined copper demand when economic growth stabilizes,” Fastmarkets analyst Boris Mikanikrezai said.

Other highlights
– Tin was another strong performer on the SHFE this morning, with the metal’s most-traded May contract climbing by 1% or 1,550 yuan per tonne to 148,130 yuan per tonne as at 10.35am Shanghai time.
– The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, remains in relative high ground at 97.19 as of 11.02am Shanghai time. This compares with 96.62 at a similar time on Wednesday.
– In US data on Thursday, gross domestic product growth for the fourth quarter of 2018 was revised to 2.2%, down from the initial estimate of 2.6%. Weekly unemployment claims came in at 211,000, lower than the forecast of 230,000. Pending home sales dropped 4.9% year-on-year, exceeding the forecast fall of 1.5%.
– In US data scheduled for Friday, the core PCE price index – known as the Federal Reserve’s preferred measure of core inflation in the US – will be of particular note given the central bank’s recent dovishness.