SHFE morning trade: Copper up due to Lower production in Chile


Main Economic Events Today:

  • China Industrial Production y-o-y fell to actual 6.5%, while expected was 7.1%
  • United Kingdom Prime Minister Theresa May Speaks

This Week:

  • Empire State, Philly Fed Manufacturing for May
  • April China Industrial Production
  • Euro Zone Q1 GDP – Revised Reading
  • K. April CPI, Employment & Retail Sales
  • Japan Preliminary First Quarter GDP


Shanghai Futures Exchange

Firstly, copper prices on the SHFE recovered during morning trading on May 15. Due to the news that China had announced more funding for its One Belt One Road initiative. Copper price was as well impacted by reports of lower production in Chile.

The most-traded July copper contract on the SHFE rose 210 yuan per tonne to 45,240 yuan per tonne as of 10:59am Shanghai time.

Secondly, Chinese president Xi Jinping said One Belt One Road plan aims to connect China with Europe, Asia and Africa through various infrastructure projects.

 “The Belt and Road initiative, which was first proposed in 2013, offers the world’s second largest economy a chance to consolidate its political presence in the region. Additionally, the initiative provides China’s battered commodity intensive sectors, many of which are struggling to contain overcapacity, a lifeline to remain relevant for years to come.” (CBA Commodities)

“China has already committed $50 billion to date and that could grow exponentially in the next 5 years. The initiative, which could cost over $1 trillion, is clearly positive for commodity consumption. We note that construction will take place over decades. Realistically gather momentum in the 2020s and will inevitably face roadblocks from political interests of the 60 countries involved.”  (Metal Bulletin)

Thirdly, Cochico announced that copper production in Chile in 1H17 was down 14.6% year-on-year to 1.19 million tonnes, due to the strikes occurring during the period.

LME’s three-month copper contract was up $13 per tonne to $5,581 per tonne as of 03:55am London time.

SHFE, LME copper stocks fall 

Observing the open interest of the July copper contract, it was at around 219,134 position on Monday morning. Following, losses in the SHFE-LME arbitrage held at around $80 per tonne last week. Demand is keeping healthy levels due to the peak season. 
Also, deliverable copper stocks at SHFE-approved warehouses fell 20,238 tonnes or 9.4% week-on-week to 194,993 tonnes as of Friday May 12.
In the meantime, LME copper stocks fell by 7,350 tonnes to 329,375 tonnes on May 12.

Base metals broadly lower; Aluminium bit higher 

Fourthly, the SHFE July aluminium price rose 1.05% or 145 yuan to 13,975 yuan per tonne. Following, SHFE July zinc price dipped 0.09% or 25 yuan to 21,590 yuan per tonne.
Observing the July lead price, it slipped 1.05% or 170 to 15,965 yuan per tonne.
In conclusion, the SHFE September nickel price was 180 yuan or 0.23% lower at 76,830 yuan per tonne. And finishing with the SHFE September tin price who fell 1,240 yuan or 0.87% to 140,990 yuan per tonne. 

Currencies & data

The Brent crude oil spot price up 0.85 to $51.62 per barrel. Texas light sweet crude oil spot price also gained 0.79 to $48.59 per barrel.
Observing the Shanghai Composite, it was up 0.36% to 3.094.53. Most noteworthy, US Empire State Manufacturing Index and NAHB Housing Market Index will be released later today. The dollar index decreased 0.01% on Monday morning to 99.19.

Bar nickel inch higher; beside multi-week lows, and oil price collapse




Marginally higher trade among base metals traded on the SHFE. Due to weaker dollar during Asian morning trade on Friday May 5. But there remained near multi-week lows following an overnight collapse in the oil price. Nickel took the uptrend, as expectations of increased supply continued to push prices down.

“European markets are buoyed by the prospects of centrist Emmanuel Macron winning the second round in the French presidential election on Sunday. [May 7]”

The strength in the European markets had pushed the dollar down yesterday’s night. Reaching a November 2016 low of 98.695. Dollar index had recently rebounded to 98.78 as of 04:32 BST. But it was still much lower compared with 99.38 at approximately the same time on Thursday.

Overnight Oil Collapse

Following, an overnight collapse in the price of oil continues to keep SHFE base metals prices under pressure this morning.

The oil price is now back to its lowest point since mid-November with WTI oil sitting at $45.51 a barrel and below the level that prevailed before the OPEC’s oil production ceiling. (According to NAB.)

Despite the pressure, SHFE bases metals prices are inching higher. The exception is nickel, which is bucking the uptrend based on fears over increased supply following the rejection of Regina Lopez as the Philippines Environment Minister on Wednesday May 3.

Nickel below 76,000 yuan per tonne

September nickel contract on SHFE stood at 75,340 yuan per tonne as of 03:54 BST. Down 930 yuan compared with the previous session’s close.

“Nickel led the sector lower as the market reacted to the failure of the Philippines Environment Minister to be confirmed by lawmakers. Ms Lopez had been spearheading the closure of the nickel mining industry due to new environmental laws.”
Appointment of  Lopez as DENR secretary came as a glimmer of hope for nickel prices amid a weakened Chinese stainless steel sector. Also a number of China-backed nickel pig iron projects coming on stream in Indonesia.

Since the country relaxed its ban on the export of unprocessed ores in January, Indonesia’s first nickel ore shipment arrived in China on Monday May 1.

A possibility that Indonesia may expand its export quota, is adding to fears of increased supply in the market.
Union workers at Glencore plc’s Raglan nickel mine

have voted 99.6% in favour of a strike mandate. Means that the USW’s negotiation committee for the mine has the authority to initiate a strike if they consider it suitable. The Raglan mine, located in the Nunavik region of northern Quebec, produces more than 37,000 tonnes of nickel-in-concentrate annually.

Copper up marginally, but the pressure is present

June copper contract on SHFE stood at 45,200 yuan per tonne as of 03:54 BST. Up 20 yuan compared with the previous session’s close.

In the mean time, the LME’s three-month copper price stood at $5,530 per tonne as of 04:48 BST. Down 0.19% from last close.  LME copper inventories rose a net 32,925 tonnes to 317,850 tonnes, with 29,275 tonnes going into Busan, after a rise of 31,250 tonnes on Thursday.
Observing the supply side, Southern Copper said a strike at its Peruvian operations in April caused a production loss of

“only 1,418 tonnes of copper”.

Weaker Chinese data; U.S. aluminium sector asks Britain & EU to unite against China


U.S. Representatives

Spokesman of the U.S. aluminum industry are speaking to EU counterparts. They have written to British Prime Minister Theresa May. Asking urgent action against “massive illegal subsidies” in China that bluster Western jobs.

Trade lawyers and some governments accuse China of unfairly subsidizing major industries in breach of the rules of the World Trade Organization (WTO). While China became part of the World Trade Organization in 2001.


Shifting focus to Aluminium


U.S. this year has reversed the focus to aluminum. Following European and U.S. action to protect their steel industries from China speaking about steel and copper of earlier times.

It has lodged a query with the WTO and launched an investigation into whether Chinese imports compromise national security.

“The WTO and U.S. and European leaders must act quickly to ensure a fair playing field.” Michael Bless, CEO CENX.O, told a news conference in London yesterday. China says it supports the work of the WTO.

  • The aluminum industry, represented by the China Trade Taskforce, has written to May urging her “to actively engage with the WTO on this matter and press for action”.

“A strong WTO that acts swiftly in situations such as this will be a vital part of securing Britain’s post-Brexit future” (Reuters)

The prime minister’s office had no immediate comment.

The industry leaders were also speaking to Brussels officials and to the Russian government. This floated the idea of an OPEC-style body for the aluminum industry.

They could not endorse that, but it was an

“acknowledgement of the severity of the issue”.


China’s Act


When China, the biggest aluminum consumer, joined the WTO it represented just over 10 percent of aluminum production worldwide. Now it is the world leader, accounting for more than 50 percent of global output and China’s Hongqiao has overtaken Russia’s Rusal as the biggest producer, while the U.S. and European sectors have gathered.

Industry body European Aluminium said the number of primary European aluminum smelters fell by nearly 40 percent between 2002 and 2015.

Trade lawyers say the ascendancy of China’s aluminum sector defies commercial logic as it faces higher bills for energy than the U.S. and Europe. It has the biggest input costs.

“China has no natural advantages other than illegal state support,” Alan Price of Washington law firm Wiley Rein said. (Reuters)


Main areas


Century Aluminum, which is majority-owned by Glencore, reported a first-quarter net loss. Part of the justification for the U.S. investigation into whether Chinese aluminum is a threat. It is that Century’s smelter in Kentucky is the only producer of high-purity aluminum required for U.S. combat aircraft.

In Europe, the main concern is how to maintain smelting capacity as part of a strong value chain, creating thousands of indirect jobs, rather than security, European Aluminium said in an email.

EU trade ministers, meeting in Brussels next week, are expected to discuss new rules on dealing with anti-dumping, which are likely to have most impact on Chinese imports.

In conclusion, the idea of OPEC-like association in the Aluminium market would impact prices in a really good way. That would make producers happy. But it will also have a great impact on Chinese economy. Mostly their imports, and also their production.


Base metals subdued; Aluminium went slightly up


Essentially lower levels

Base metals prices started a holiday-shortened week mostly on the defensive. With LME premarket trading on Tuesday April 18 seeing lower levels. – Potentially supportive macroeconomic developments were shrugged off.

The exception was aluminium. It pushed higher on weekend news that planned Chinese capacity extensions were being put on ice.

On the other hand, copper and zinc were wafting. Near last week’s three-month lows, nickel touched its softest for two-and-a-half months. Lead hit its weakest for two months.

“Sentiment was a bit sloppy last week, and that has carried over today it seems. There is a run of short weeks now so business looks like being a bit patchy at times.”

Consequently, there was a muted reaction to Monday’s upbeat Chinese data! First quarter GDP grew 6.9% year-on-year, marking the fastest growth rate in 18 months. And most noteworthy beating forecasts of 6.8%


Metals session except Al


The rest of the session may see the lackluster trend being maintained ahead of a string of metals.

“The base metals have been showing weakness in recent weeks and have so far not seen any pick-up even amid the shift into the seasonally strong second quarter. The lack of upside momentum in most of the metals since mid-February has increased the chance of stale long liquidation,” William Adams of Metal Bulletin said.




Aluminium goes it alone; China supply clenching?

The three-month aluminium price forged higher, recently trading at $1,928 per tonne, up $18 from the Thursday close. The local government in Xinjiang, western China, halted three new aluminium projects with combined capacity of 2 million tons per year for violating rules aimed at curbing output.



Other near multi-month lows


The three-month copper price slid to $5,663 per tonne, a $29 decline, and looks vulnerable to a test of last week’s $5,615 low. While three-month zinc price was at $2,593 per tonne, a $31 loss, with a test of $2,558 – last week’s low-point – possible. Also, three-month lead price skidded as low as $2,200 per tonne, a $39 loss, while nickel fell to $9,560, down $190. Most noteworthy, three-month tin price stood at $19,795 per tonne, however, a $190 advance.


Currency moves and data releases


The dollar index was recently down 0.29 at 100.29.

Brent crude oil fell $0.61 to $55.00 per barrel.

In equities, the UK FTSE 100 index fell nearly 70 points to around 7,258.

In data today, US building permits, housing starts, the capacity utilisation rate and industrial production are due.


Crude Oil Update

Venezuela’s crude-stained oil tankers banned at sea (*check the link below)

  • June West Texas Intermediate crude oil futures are trading lower shortly before the regular session opening as investors react to a bearish government report.

Government data released on Monday showed that May output is expected to rise by 123,000 barrels per day to 5.19 million bpd.

If this information is right, May production will post its biggest monthly increase since February 2015 and the highest monthly production level since November 2015.

Overcoming the angle at $53.08 will indicate the return of buyers. This could create a labored rally into angles at $53.39, $53.77 and $53.95. Other is the last potential resistance angle before the $54.14 main top.

OPEC commented on its plans about extending to cut productio . But it may not be strong enough to turn this market around.