LIVE FUTURES REPORT 10/04: Firm US dollar, economic growth concerns send most SHFE base metals prices down; Pb declines 0.9%

The most-traded May lead contract on the SHFE slid to 16,745 yuan ($2,494) per tonne as at 10.15am Shanghai time, down by 155 yuan per tonne or 0.9% from Tuesday’s close of 16,900 yuan per tonne.

“Clouds seemed to form above markets after the IMF (International Monetary Fund) warned of slowing economic growth and [US] President Trump threatened to impose tariffs on the [European Union],” David Plank, analyst at Australia and New Zealand Banking Group (ANZ), said in a morning note.

“The IMF cut its outlook for global growth to 3.3% for this year, down from 3.5% in January. This would be the weakest world growth rate since 2009 and the third downgrade in six months. The 2019 outlook for China was raised a smidgen, but forecasts were cut for the other major economies. Despite the upswing in the global dataflow, the IMF sees the risks as skewed to the downside,” Plank added.

In addition, the dollar index remains in relative high ground above the psychological level of 97, which is also dampening investors’ appetite for commodities and thus weighing on base metals prices.

The dollar index, at 97.06 as at 10.15am Shanghai time, is little changed from its close on Tuesday of 97.00.

Lead’s more pronounced weakness in comparison with its peers comes amid rising stock levels in China; inventories at SHFE-listed warehouses totaled 34,630 tonnes on April 4, up by 21.7% month on month and up by 36.3% year on year.

At the same time, weakened demand for lead from downstream consumers has also undermined the metal’s price.

“Lead-acid batteries face increasing headwinds from [Chinese] authorities seeking to phase out the internal combustion engine and from alternative battery chemistries that have been deemed more environmentally friendly,” James Moore, Fastmarkets research analyst, said.

“China’s Ministry of Ecology & Environment has reiterated its commitment to halt illegal lead-acid battery recycling and to reduce pollution across the sector,” he added.

Other highlights

• Aluminium was the only base metal traded on the SHFE to record a price gain this morning amid continued tight supply in Asia; the most-traded May aluminium contract on the SHFE rose to 13,865 yuan per tonne as at 10.15am Shanghai time, up by 0.4% or 55 yuan per tonne from Tuesday’s close of 13,810 yuan per tonne.
• In European data on Tuesday, Italian retail sales month on month for the March period were recorded at 0.1%, beating expectations of a fall to -0.2% from 0.5% the prior month. Meanwhile, the Swiss unemployment rate over the same period was in line with expectations at 2.4%.
• In the US data on Tuesday, the JOLTS job opening figure for the March period was recorded at 7.09 million, missing expectations of 7.54 million and down from 7.63 million in February.
• In data on Wednesday, French, Italian and UK industrial production are due. Other UK data of note includes manufacturing production and construction output.
• In addition, the European Central Bank will set its main refinancing rate and release its monetary policy statement.
• In the United States, Federal Open Market Committee (FOMC) member Randal Quarles is due to speak, while the minutes from the FOMC’s March 19-20 meeting are due.