LIVE FUTURES REPORT 14/12: Weak Chinese economic data pulls SHFE base metals prices down

Earlier on Friday, China’s National Bureau of Statistics reported that the country’s industrial output grew by 5.4% year on year in November, down from last month’s 5.9% year-on-year gain and lower than the expected 5.9% increase. Chinese retail sales for the same month were similarly weak; retail sales rose by 8.1% year on year in November – lower than the expected 8.8%.

On a lighter note, China’s unemployment rate for November stood at 4.8%, compared with 4.9% a month earlier. Fixed asset investment for January-November was also slightly better than expected with a 5.9% – exceeding the forecast 5.8%.

But the poor economic indicators out from China were enough to renew risk-off sentiment in the market this morning, which was compounded by a relatively firm dollar; the dollar was little changed at 97.11 as at 10.06am Shanghai time, but this is up from a reading of 96.80 at roughly the same time on December 7.

As a result, the base metals on the SHFE were all in negative territory but zinc’s most-traded February contract price reflected the biggest decrease with a drop of 0.8%.

The persistent backwardation of this metal in the cash-to-three-month spread on the London Metal Exchange, last seen at $76.50 per tonne early on Friday, has hurt buying sentiment and caused more material to return to LME warehouses, Fastmarkets analyst Andy Farida noted.

In copper, the broader risk-off sentiment stemming from concerns of slowing growth in China is offsetting any support from potential supply disruptions in Chile.

The most-traded February copper contract was at 49,140 yuan ($7,143) per tonne as at 10.06am Shanghai time, down by 200 yuan per tonne from Thursday’s close.

“Workers at the Chuquicamta copper mine downed tools and blocked entrances to the operation to protest about working conditions. Two smelters in the region also shut down for a week-long maintenance overhaul after their owners failed to meet new environmental standards,” ANZ Research said.

Base metals prices

• The SHFE March nickel contract was down by 320 yuan per tonne to 89,060 yuan per tonne.
• The SHFE February zinc contract dropped by 175 yuan per tonne to 20,800 yuan per tonne.
• The SHFE January lead contract declined by 75 yuan per tonne to 18,425 yuan per tonne.
• The SHFE May tin contract slid by 40 yuan per tonne to 146,630 yuan per tonne.
• The SHFE February copper contract dipped by 200 yuan per tonne to 49,140 yuan per tonne.
• The SHFE January aluminium contract fell by 25 yuan per tonne to 13,920 yuan per tonne.

Currency moves and data releases

• The dollar index was up by 0.04% at 97.11 as at 10.06am Shanghai time.
• In other commodities, the Brent crude oil spot price was at $61.14 per barrel as at 10.14am Shanghai time.
• In equities, the Shanghai Composite Index was down 0.6% to 2,619.07 as at 11.30am Shanghai time.
• In US data on Thursday, the Department of Treasury reported a budget deficit of $204.9 billion in November, higher than the $100.5 billion deficit last month and the forecast deficit of $193.5 billion.
• Meanwhile, the US Energy Information Administration noted that domestic supplies of natural gas fell by 77 billion cubic feet for the week ended December 7 compared to last week’s drop of 63 billion cubic feet, but lower than the expected fall of 81 billion cubic feet.
• Later today, the US is expected to release reports on core retail sales, capacity utilization rate, industrial production, and manufacturing purchasing manager’s index.
• In Europe, the market can expect data on the European Union’s, as well as France, Germany, and the UK’s manufacturing PMI. Germany is also publishing its wholesale price index, while the UK will be releasing its Conference Board Leading Index report.