LIVE FUTURES REPORT 31/07: Gains across the board for SHFE base metals, weak dollar supporting

Base metals prices on the Shanghai Futures Exchange were up across the board during morning trading on Tuesday July 31, with a weaker dollar providing broad support to the complex.

The dollar index stood at 94.39 as at 11.07am Shanghai time, down from a reading of 94.72 at roughly the same time on Monday.

This morning’s generally stronger tone comes despite weaker-than-expected economic indicators out of China earlier in the day.

Chinese data out on Tuesday showed that factory activity was slightly lower than expected in July, with the official manufacturing purchasing manager’s index (PMI) coming in at 51.2 against a forecast print of 51.4. A reading above 50 indicates expansion, while a reading below that signals contraction.

Meanwhile, the country’s non-manufacturing PMI also fell in July, coming in at 54 from 55 in June.

In copper, potential supply disruptions continued to provide even greater support to prices, with a number of labor disputes bubbling in the background.

“Workers at the Escondida copper operation rejected the latest offer from management and are now ready to strike. And at Codelco’s Chuquicamata copper mine in Chile, operations were disrupted as protesting workers blocked access with burning tyres,” ANZ Research noted on Tuesday.

As a result, the most-traded September copper contract on the SHFE traded at 49,800 yuan ($7,301) per tonne as at 11.07am Shanghai time, rising 440 yuan per tonne or 0.9% from Monday’s close.

Moreover, red metal prices are benefitting from a steady drawdown in exchange inventories.

SHFE stocks – at 197,068 tonnes as of July 27 – are down around 67,000 tonnes or 25% so far in July (including a fall of about 14,000 tonnes this week) after they fell around 4,000 tonnes or 2% in June.

Meanwhile, London Metal Exchange copper stocks are down by roughly 34,000 tonnes or 12% so far in July. Stocks totaled 256,275 tonnes on Monday.

Other metals up

  • The SHFE September aluminium contract rose 110 yuan per tonne to 14,525 yuan per tonne.
  • The SHFE September zinc contract climbed 255 yuan per tonne to 21,195 yuan per tonne.
  • The SHFE September lead contract edged up 10 yuan per tonne to 18,445 yuan per tonne.
  • The SHFE September tin contract increased 140 yuan per tonne to 147,870 yuan per tonne.
  • The SHFE September nickel contract jumped 1,140 yuan per tonne to 112,820 yuan per tonne.

Currency moves and data releases

  • The dollar index inched up 0.06% to 94.39 as at 11.07am Shanghai time.
  • In other commodities, the Brent crude oil spot price was up 0.04% to $75.40 per barrel as at 11.07 am Shanghai.
  • In equities, the Shanghai Composite dipped 0.03% to 2,868.15 as at 12.38pm Shanghai time.
  • It is a heavy day for data on Tuesday, with data out already showing China’s non-manufacturing and manufacturing PMI for July stood at 54 and 51.2 respectively – both slightly below expectations.
  • Later there is a host of European data that includes German retail sales, the EU’s flash consumer price index (CPI), preliminary flash gross domestic product and unemployment rate.
  • US data out on Tuesday includes the core PCE price index, employment cost index, personal spending, the Chicago PMI and CB consumer confidence.