LIVE FUTURES REPORT 31/01: SHFE base metals prices broadly push up on weak US dollar, easing trade tensions

Base metals prices on the Shanghai Futures Exchange were mostly up during Asian morning trading on Thursday January 31, supported by easing trade tensions and a softer dollar.

The US currency weakened overnight followed dovish comments from the US Federal Reserve in which the central bank pledged to be “patient” with future interest rate increases. The dollar index, at 95.31 as at 10.48am Shanghai time, is down from 95.80 at a similar time on Wednesday.

“The [Federal Open Market Committee] took a dovish tilt at its January meeting. Removed from its statement was the reference to ‘further gradual increases’ in rates and instead it will be ‘patient’ in the future rate considerations given muted inflation and global development,” Jack Chambers, economist with ANZ Research, said in a morning note.

The comments were supportive to riskier assets and global markets benefitted from a generally more risk-friendly environment given the weaker US currency.

Providing further support to the base metals were the continued trade talks between the United States and China, currently taking place in the White House complex in Washington DC.

“The focus of the market was on the [Federal Reserve’s] comments and the progress of the China-US trade talks… the market seems to be finding support from the healthy progress [of the trade talks] after a delegation led by China’s vice premier Liu He arrived in Washington on January 30 for a new round of negotiations with US counterparts headed by US Treasure Secretary Steven Mnuchin and Trade Representative Robert Lighthizer,” China-based broker Citic Futures said in a morning note.

Negotiations will resume later today, when US President Donald Trump is expected to meet Liu.

As a result, the weak dollar combined with positivity stemming from ongoing US-China trade talks has buoyed base metals prices this morning, with copper in particular putting in a strong performance.

The most-traded March copper contract on the SHFE climbed to 48,170 yuan ($7,169) per tonne as at 10.47am Shanghai time, up by 470 yuan per tonne or 1% from Wednesday’s close.

The red metal also benefits from expectations of a tightening refined market.

“The International Copper Study Group estimates that the refined copper market was in a deficit of 545,000 tonnes in the first 10 months of 2018, including a deficit of 132,000 tonnes in October. The January-October 2018 deficit was mainly the result of a constrained growth in refined output (+1.2% year on year), due to an unexpectedly high number of smelter disruptions, especially at Vedanta’s Tuticorin smelter in India. The deficit was further underpinned by an acceleration in consumption growth (+2.8% year on year), most notably in China (+6.9%),” Fastmarkets analyst Boris Mikanikrezai said.

“The combined fall of around 100,000 tonnes in global exchange inventories in November-December 2018 suggests the refined copper market continued to tighten into the end of the year,” Mikanikrezai added.

Base metals prices

  • The SHFE March copper contract moved up by 470 yuan per tonne to 48,170 yuan per tonne.
  • The SHFE March aluminium contract edged up by 65 yuan per tonne to 13,525 yuan per tonne.
  • The SHFE March zinc contract climbed up by 195 yuan per tonne to 21,910 yuan per tonne.
  • The SHFE March lead contract dipped by 45 yuan per tonne to 17,455 yuan per tonne.
  • The SHFE May tin contract moved down by 780 yuan per tonne to 147,840 yuan per tonne.
  • The SHFE May nickel contract rose by 490 yuan per tonne to 97,970 yuan per tonne.

Currency moves and data releases

  • The dollar index was down by 0.08% at 95.31 as at 10.48 am Shanghai time.
  • In equities, the Shanghai Composite edged up by 0.63% to 2,591.84 as at 11.48am Shanghai time.
  • In European data on Wednesday, French flash gross domestic product (GDP) growth came in at 0.3% for the fourth quarter of last year, the same pace as in the prior quarter. French consumer spending fell by more than expected in December 2018 with a month-on-month decline of 1.5% – a decrease of 0.3% had been expected.
  • In Germany, the GfK is predicting a consumer climate value of 10.8 points for February, up from January’s revised figure of 10.5 points. German import prices fell by 1.3% in December 2018 from the prior month, while the country’s preliminary consumer price index (CPI) rose by 1.4% in January following a 1.7% increase in the prior month.
  • In US data on Wednesday, in a preview of Friday’s jobs report, the ADP non-farm employment change showed 213,000 Americans joined the labor market in January from December 2018, above the forecast of 180,000. US pending home sales dipped by 2.2% in December last year, while weekly crude oil inventories rose by 900,000 barrels to 445.9 million barrels in the week ended January 25.
  • In data already out on Thursday, China’s manufacturing and non-manufacturing purchasing managers’ indices (PMIs) for January stood at 49.5 and 54.7 respectively.
  • European data out later includes German retail sales and unemployment change, nationwide house prices from the United Kingdom, Spanish flash GDP and CPI, Italian monthly unemployment rate and preliminary GDP and the European Union’s preliminary flash GDP and unemployment rate.
  • US releases include Challenger job cuts, unemployment claims, the Chicago PMI, new home sales and natural gas storage.
  • In addition, German Bundesbank president Jens Weidmann is speaking.

London Metal Exchange, base metals prices

Shanghai Futures Exchange, base metals prices

Changjiang spot prices, base metals prices