LIVE FUTURES REPORT 29/11: SHFE base metals prices rebound on softer dollar; tin continues to weaken

Tin was the sole exception to the firmer tone seen across the rest of the SHFE base metals complex this morning, with the metal continuing to succumb to the volatility associated with low market liquidity and concerns over elevated on-exchange stock levels.

The dollar index, at 96.82 as at 9.35am Shanghai time, began to soften following a somewhat dovish speech by US Federal Reserve chairman Jerome Powell overnight. The index had been at 97.42 at roughly the same time on Wednesday.

“The Fed Chair, overnight, described the policy rate as “just below” neutral and said that it would take some time to understand the impact of rate hikes. Overall, his speech was taken to confirm that the Fed is likely to temper the path of rate hikes in December, and that it is closer to pausing the tightening cycle than previously thought,” ANZ Research said on Thursday.

As a result, base metals on the SHFE gained some momentum due to the weakening US currency, which helped offset the lingering concerns surrounding the upcoming Group of Twenty (G20) summit in Argentina at the end of this week, at which US President Donald Trump and his Chinese counterpart Xi Jinping will meet.

Earlier this week, Trump said that he plans to move ahead with plans to raise the existing 10% tariff on $200 billion worth of Chinese imports to 25% from January 1, 2019.

Benefitting the most from the softening in dollar index, the most-traded January copper contract rose to 49,640 yuan ($7,136) per tonne as at 9.35am Shanghai time, up by 360 yuan per tonne or 0.7% from Wednesday’s close.

Providing further support to the red metal were developing supply concerns.

“The availability [of copper] is likely to tighten across the short term after Europe’s largest copper smelter Aurubis, with a combined annual capacity of 990,000 tonnes, announced it had shut three of its four copper smelters for unplanned maintenance,” Fastmarkets research analyst James Moore pointed out.

In addition, “workers at BHP’s Chilean Spence copper mine downed tools to protest at staff cuts at the operation. And this renewed labor unrest comes as inventories held on exchanges hit their lowest level since 2015”, according to ANZ Research.

In China, Shanghai Futures Exchange copper stocks totaled 133,163 tonnes on November 23, down from a peak of 306,645 tonnes in April.

Elsewhere, tin continued its downward trend under the pressure of high stocks, with the metal’s most-traded January contact dropping to 143,760 yuan per tonne as at 9.35am Shanghai time, down by 240 yuan per tonne or 0.2% from Wednesday’s close.

“The real-time micro indicators of the tin market have been broadly stable, suggesting that the recent price weakness is not justified. Given poor liquidity conditions, tin prices are vulnerable to sharp swings. Once leveraged market participants are out of the market, tin prices should stabilize again and move gradually higher in light of the tighter fundamentals,” Fastmarkets research analyst Boris Mikanikrezai said.

“SHFE tin stocks – at 8,716 tonnes as of November 23 – are up around 2,200 tonnes or 34% in the quarter to date (including a 528-tonne increase last week),” Mikanikrezai added.

Base metals prices

• The SHFE January copper contract price increased by 360 yuan per tonne to 49,640 yuan per tonne.
• The SHFE January aluminium contract price edged up by 25 yuan per tonne to 13,700 yuan per tonne.
• The SHFE January zinc contract price went up by 60 yuan per tonne to 20,285 yuan per tonne.
• The SHFE January lead contract price climbed by 150 yuan per tonne to 18,300 yuan per tonne.
• The SHFE January tin contract price dropped by 240 yuan per tonne to 143,760 yuan per tonne.
• The SHFE January nickel contract price rose by 250 yuan per tonne to 89,810 yuan per tonne.

Currency moves and data releases

• The dollar index edged down by 0.02% to 96.82 as at 9.35am Shanghai time.
• In equities, the Shanghai Composite went up by 0.22% to 2,607.54 as at 10.15am Shanghai time.
• In data on Wednesday, US new home sales came in at 544,000 units, below the previous reading of 597,000 units and the forecast figure of 583,000 units. And the Richmond Manufacturing Index dropped to 14, lower than its reading of 15 in October.
• Weekly US crude oil inventories rose by 3.6 million barrels to 450.5 million barrels in the week ended November 23. The increase marked the tenth consecutive weekly rise and exceeded the forecast 600,000-barrel increase.
• US third-quarter gross domestic product (GDP) growth came in at 3.5%, unrevised from previously and missing an expected reading of 3.6%.
• The economic agenda is busy on Thursday with data already out showing Japan retail sales recorded 3.5% year-on-year growth in October, beating expected and previous prints of 2.7% and 2.1% respectively.
• Later, there is German and Spanish consumer price index (CPI) data, French preliminary GDP, German unemployment change, a European Central Bank (ECB) financial stability review as well as net lending to individuals, M4 money supply and mortgage approvals from the United Kingdom.
• US releases due on Thursday include the core PCE Price Index, personal spending, personal income, unemployment claims, pending home sales, natural gas storage and the release of the US Federal Open Market Committee’s November meeting minutes.
• In addition, ECB President Mario Draghi is speaking.