LIVE FUTURES REPORT 06/07: Concerns over impending trade tariffs sink SHFE copper prices

The most-traded August copper contract price on the SHFE opened with a slight gain in the morning session, before falling to 49,170 yuan ($7,407) per tonne as at 10.13am Shanghai time, down 160 yuan per tonne from Thursday’s close.

Overnight, US President Donald Trump announced that a 25% tariff on $34 billion worth of China-origin goods will come into effect at 12.01am Washington time on Friday, with another $16 billion expected to go into effect in two weeks. President Trump added that he would consider imposing additional tariffs of $500 billion should China respond in kind.

China is widely expected to set a 25% levy on US goods worth $34 billion on Friday in response.

Though the tariffs had been expected, the news still triggered a large sell-off in copper.

Liquidation in prompt copper contracts has picked up in recent days with open interest for the SHFE August contract falling to 169,362 positions, compared with 188,945 positions two weeks ago.

“The impending tariffs from both the US and China continued to weigh on the base metals sector. Copper prices fell further as investors take a ‘wait and see’ approach to the trade conflict,” ANZ Research said.

In addition, the minutes from the US Federal Open Market Committee’s (FOMC) June meeting reaffirmed the path for gradual interest rate increases in the US, putting a cap on the dollar index’s recent slide and placing further pressure on red metal prices.

The dollar index stood at 94.45 as at 10.10am Shanghai time, compared with a low of 94.17 on Thursday.

The uptick in US-China trade tensions and firmer dollar outweighed any optimism surrounding possibly supply-side disruptions in the copper market.

“Chilean unions at the Chuquicamata copper mine are threatening strike action, while at Escondida they are still negotiating with management. New and tighter environmental regulations threaten to stop copper scrap imports into China, which will leave a significantly hole in copper supply, putting greater demand on refined copper and concentrate imports,” ANZ Research said.

Copper stocks on the London Metal Exchange fell a net 3,225 tonnes to 279,000 tonnes on Thursday, while 1,475 tonnes were freshly canceled across Europe and Asia. The SHFE stocks report is due later on Friday.

Base metals prices

• The SHFE September aluminium contract gained 100 yuan per tonne to 14,090 yuan per tonne.
• The SHFE August zinc contract rose 160 yuan per tonne to 21,910 yuan per tonne.
• The SHFE August lead contract dipped 35 yuan per tonne to 19,570 yuan per tonne.
• The SHFE September nickel contract fell 950 yuan per tonne to 110,830 yuan per tonne.
• The SHFE September tin contract slipped 500 yuan per tonne to 142,100 yuan per tonne.

Currency moves and data releases

• The dollar index was up 0.06% at 94.45 as at 10.10am Shanghai time.
• In other commodities, the Brent crude oil spot price was down 0.55% to $77.10 per barrel as at 10.10am Shanghai time.
• In equities, the Shanghai Composite was down by 0.96% to 2,707.17 as at 11.03am Shanghai time.
• In US data on Thursday, Challenger job cuts were up by 19.6% in June, compared with the same month a year ago. The June ADP non-farm employment change came in lower than expected at 177,000, though May’s increase was revised upward by 11,000 to 189,000. Weekly unemployment claims stood at 231,000 against an expected 225,000. The final services purchasing managers’ index (PMI) was in line with expectations at 56.5, while the ISM non-manufacturing PMI surprised to the upside with a print of 59.1 – 58.3 had been called for. Crude oil inventories unexpectedly rose in the week to June 29 with a 1.2-million-barrel increase.
• The economic agenda today is relatively light with focus on the US employment report and the country’s trade balance.