LIVE FUTURES REPORT 19/09: SHFE base metals largely shrug off rising trade tensions; Cu prices supported by positive demand outlook

US President Donald Trump this week imposed 10% tariffs on a further $200 billion of Chinese goods – markets no doubt finding some solace from the fact that it was not a more damaging 25%.

“The imposition of 10% tariffs raised some hopes that the intensity of the trade war is easing and that upcoming negotiations may bear some fruit,” ANZ Research noted on Wednesday.

The Chinese government responded to the latest US tariffs by saying on Tuesday that it plans to impose new tariffs – at 5% and 10% – on $60 billion worth of US goods. These tariffs are less than Beijing had first threatened when it put forward a list in August listing duties of up to 25%.

The lower-than-expected duties have, at least momentarily, brought some positivity to the base metals market, which has allowed the SHFE base metals to push higher this morning

In particular, copper prices outperformed the rest of the SHFE complex, supported by firm spot demand and a positive long-term outlook for demand.

The most-traded November copper contract price on the SHFE rose to 49,480 yuan ($7,211) per tonne as at 10.21am Shanghai time, up by 800 yuan per tonne from Tuesday’s close.

News that the Chinese government will work with local authorities to speed up major infrastructure projects has boosted expectations for higher domestic copper demand, lending support to red metal prices.

In the near term, copper prices are also well supported by an expected uptick in demand from consumers ahead of China’s National Day holidays on October 1-7.

In physicals, the premium for spot copper cathode rose above $100 per tonne in Shanghai for the first time in three years. Premiums have risen steadily since early August, indicative of stronger spot demand for the material.

In addition, continuous falling of copper inventories triggered concerns towards a tight supply amid rising demand.

“Copper inventories on exchanges fell to their lowest level since December 2016, while premiums in China are rising, a sign that demand is strong,” ANZ Research said.

The rest of the SHFE base metals generally followed copper’s upward move, the exception being tin which was down by 1,640 yuan per tonne from Tuesday’s close.

Base metals prices

• The SHFE November aluminium contract price rose 5 yuan per tonne to 14,490 yuan per tonne.
• The SHFE October lead contract price gained 20 yuan per tonne to 18,735 yuan per tonne.
• The SHFE November nickel contract edged up 120 yuan per tonne to 102,160 yuan per tonne.
• The SHFE January tin contract price slid 1,670 yuan per tonne to 142,830 yuan per tonne.
• The SHFE November zinc contract price gained 205 yuan per tonne to 21,250 yuan per tonne.

Currency moves and data releases

• The dollar index was up 0.03% at 94.635 as at 10.57am Shanghai time.
• In other commodities, the Brent crude oil spot price was down 0.03% to $79.01 per barrel as at 11am Shanghai time.
• In equities, the Shanghai Composite was up by 0.98% to 2,726.62 as at 11am Shanghai time.
• In data on Wednesday, there is a host of releases from the United Kingdom, including the headline and core consumer price indices, producer price input and output, retail price index and house price index.
• US data due for release on Wednesday includes building permits, housing starts, current account and crude oil inventories.
• In addition, European Central Bank President Mario Draghi is speaking in the German capital of Berlin.