LIVE FUTURES REPORT 30/05: SHFE base metals prices drift lower; Zn, Pb buck trend

Base metals prices on the Shanghai Futures Exchange were broadly down during morning trading on Thursday May 30, with investors’ appetite for risk damped by increasing US-China trade tensions following media reports that China may restrict its rare earths exports to the United States.

“A flurry of Chinese media reports have suggested Beijing may cut of exports of rare earth metals. China dominates the market, making up 80% of imports into the US. This saw a wave of selling hit the base metals market,” Jack Chambers, an analyst at ANZ Research, said in a morning note.

Broad risk aversion in the market also continues to favor the US currency, with the dollar index climbing back above 98 this morning. The index was little changed at 98.12 as at 10.26am Shanghai time, but is up from 97.94 at a similar time on Wednesday.

The tense macroeconomic backdrop combined with the firmer dollar to push most of the SHFE base metals prices lower this morning, with copper, aluminium and nickel down between 0.1% and 0.5% while tin fell by 1.2%.

Bucking the broad weakness were zinc and sister metal lead, with the former up a healthy 1.2% on news of the closure of seven lead producers across eastern and southern China after they failed to comply with industrial standards.

Lead’s most-traded July contract ticked up to 16,135 yuan ($2,334) per tonne as at 10.26 am Shanghai time, up by 190 yuan per tonne from Wednesday’s close of 15,945 yuan per tonne.

Other highlights

  • Lead’s sister metal zinc was also buoyed this morning, with the metal’s most-traded July contract rising to 20,660 yuan per tonne as at 10.26 am Shanghai time, up by 85 yuan per tonne, or 0.4%, from Wednesday’s close of 20,575 yuan per tonne.
  • In US data on Thursday, first quarter gross domestic product (GDP), goods trade balance, pending home sales and crude oil inventories are of note.
  • In addition, US Federal Open Market Committee member Richard Clarida is speaking.
  • Looking to Friday, market focus will be on the release of China’s manufacturing purchasing managers’ index (PMI). Activity in China’s manufacturing sector is forecast to have contracted again this month at 49.9.
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