LIVE FUTURES REPORT 01/03: SHFE Zn, Pb prices climb; rest of complex mixed

Lead and sister metal zinc both put in strong performances to record gains of 1.3% and 0.8% respectively so far this morning, tracking the stronger performance seen in the metals’ prices on the London Metal Exchange at the close on Thursday against a supportive fundamental backdrop.

The most-traded April lead price stood at 17,585 yuan ($2,628) per tonne as at 9.53am Shanghai time, up by 220 yuan per tonne from Thursday’s closing price of 17,365 yuan per tonne.

Lean’s fundamental backdrop “remains supportive simply because the decline in global mine output in 2018 has negatively affected output of refined metal. Due to low grades and mine disruptions in 2018, global mine output slipped to 4.65 million tonnes from 4.71 million tonnes in 2017”, Fastmarkets analyst Andy Farida said.

“Data on the ground supports this claim as Chinese smelters saw import of lead ores and concentrates fall in 2018 to 624,000 tonnes from the 653,000 tonnes in 2017,” Farida added.

The other SHFE base metals were more subdued, with prices either little changed or weaker, while market participants weigh up developments in trade talks between China and the United States against weak Chinese manufacturing data on Thursday.

“US economic adviser Larry Kudlow said that [the US and China] were on the cusp of a ‘remarkable historic deal’, with Beijing pledging to significantly cut subsidies to state-owned firms. These easing trade tensions also helped boost sentiment in the base metals sector,” senior ANZ Research economist Cherelle Murphy said in a morning note.

On Thursday, China’s official manufacturing purchasing managers’ index (PMI) fell for a third consecutive month, dropping to 49.2 in February from 49.5 in January, according to data released by the country’s National Bureau of Statistics. A reading below 50 signals industry contraction, while above that level indicates expansion.

“The [base metals] sector had been under pressure earlier in the session after China’s PMI fell further. There were some bright spots in the report, with new orders and input prices rising, indicating that China’s economy is likely to gradually bottom out in the coming months,” ANZ’s Murphy added.

Elsewhere, aluminium was unable to keep from sinking on rising fears regarding a flood of Russia-origin metal hitting the global market after sanctions against Russian producer UC Rusal were removed.

“UC Rusal is looking for warehouses to stock its 300,000 tonnes of aluminum, and this manifested fears that excess stocks might flow into market after the sanctions on Rusal were lifted,” according to China-based brokerage Guotai Junan Futures.

The sanctions on Rusal were imposed by the Office of Foreign Assets Control (OFAC), part of the US Treasury Department, on April 6, 2018. On January 27, OFAC removed the sanctions, which had been in place for nearly 10 months.

Base metals prices

• The SHFE May aluminium contract dipped by 50 yuan per tonne to 13,630 yuan per tonne.
• The SHFE April copper contract rose by 30 yuan per tonne to 50,190 yuan per tonne
• The SHFE April zinc contract price was up by 175 yuan per tonne to 21,920 yuan per tonne.
• The SHFE April nickel contract price was down by 260 yuan per tonne to 102,430 yuan per tonne.
• The SHFE May tin contract price edged up by 130 yuan per tonne to 150,730 yuan per tonne.

Currency moves and data releases

• The dollar index was up by 0.03% to 96.23 as at 09:53am Shanghai time.
• In equities, the Shanghai Composite was down by 0.14% to 2,936.87 as at 10.04 am Shanghai time.
• In a busy day for data on Thursday, China’s manufacturing and non-manufacturing PMIs for February both disappointed at 49.2 and 54.3 respectively.
• The United Kingdom’s Nationwide house price index (HPI) showed house prices fell by 0.1% in February from the prior month, which was in line with expectations.
• German import prices fell by 0.2% in January from a month earlier, while export prices rose by 0.1% in the same comparison, according to data from the Federal Statistical Office (Destatis).
• Germany’s preliminary consumer price index (CPI) for February was in line with expectations with a 0.5% month-on-month increase.
• In France, consumer spending rebounded by 1.2% in January from a sharp decline of 1.5% in December 2018. The country’s preliminary CPI for February stood at 0.0% after a drop of 0.4% in January.
• French preliminary gross domestic product (GDP) rose by 0.3% in the fourth quarter of 2018, meeting analysts’ expectations.
• In US data on Thursday, the country’s GDP grew by an annual rate of 2.6% in October-December 2018, surpassing an expected 2.2% gain, according to a preliminary estimate released by the US Commerce Department. The GDP price index for the same period came in at 1.8%, which was better than the forecast 1.7%.
• In other US releases, weekly unemployment claims were above estimates at 225,000, while the Chicago purchasing managers’ index (PMI) stood at 64.7, beating the forecast 57.3.
• The economic agenda on Friday is similarly busy with a host of manufacturing PMI data out across China, Europe and the US.
• Other highlights due Friday include the US’ core PCE price index, personal spending, revised University of Michigan consumer sentiment and inflation expectations and total vehicle sales.