LIVE FUTURES REPORT 16/04: SHFE base metals prices broadly rangebound; Zn slides 1.4%

Zinc prices on the Shanghai Futures Exchange gave a decidedly negative performance during morning trading on Tuesday April 16, while the rest of the complex was largely rangebound amid a firmer US dollar and hopes of an imminent US-China trade deal.

The base metals had benefited from renewed risk-on sentiment on Monday after better-than-expected monetary data from China at the end of last week; China’s new bank loans rebounded in March, rising far more than expected with an increase of 1.69 trillion yuan. This considerably outstripped the forecast of 1.2 trillion yuan, according to data released by the People’s Bank of China on Friday.

Meanwhile, the country’s broad M2 money supply grew by 8.6% year on year in March – the highest in 13 months.

“It appears that the Chinese authorities’ multifaceted attempts to counter the negative economic impacts of the trade war are bearing fruit. On top of the [purchasing managers’ index] improvement, credit and money aggregates lifted in the data released yesterday. Of course, with China’s economy-wide debt already at 250% of [gross domestic product], there is a limit to how many more times the leverage lever can be pulled. But perhaps that’s (once more) a problem for another day,” David Plank, analyst at Australia and New Zealand Banking Group (ANZ), said in a morning note.

This along with growing optimism that the United States and China can resolve their trade dispute has allowed most of the base metals traded on the SHFE to stay relatively buoyant amid a firmer US dollar.

The dollar index, which measures the strength of the US dollar against a basket of foreign currencies, was at 96.99 as at 10.18am Shanghai time, little changed from its previous close but up from 96.84 at a similar time on Monday.

In zinc, prices came under additional pressure from concerns over increased supply, with the metal giving the worst performance of its peers this morning.

The most-traded June zinc contract on the SHFE stood at 22,180 yuan ($3,306) per tonne as at 10.17am Shanghai time, down by 320 yuan per tonne or 1.4% from Monday’s close of 22,500 yuan per tonne.

Fresh inflows of zinc into London Metal Exchange sheds on Monday reignited selling interest in the metal, while fears that Chinese zinc production may rise this month added to the bearish tone.

Zinc stocks at LME-listed sheds rose by 4,150 tonnes to 56,125 tonnes on Monday.

“Zinc came under pressure after inventories on the LME rose sharply. The 7.5% increase was the biggest gain in almost a year. Antaike also warned that Chinese zinc output may rise 1.5% to 408kt in April from March,” ANZ’s Plank said.

Other highlights
– The Shanghai Composite was up by 0.37% to 3,189.53 as at 11.16 Shanghai time.
– In UK data on Tuesday, the average earnings index, unemployment rate and claimant count are due.
– US releases of note on Tuesday include capacity utilization rate and industrial production.
– Looking ahead to Wednesday, there is a host of Chinese data that includes fixed asset investment, industrial production, a National Bureau of Statistics conference, retail sales and the unemployment rate.

Huaqing Fu

huaqing.fu@fastmarkets.com

Published

Huaqing Fu

April 16, 2019

06:05 GMT

Shanghai