Base metals prices on the Shanghai Futures Exchange were mixed during Asian morning trading on Tuesday February 12, with a firm dollar and uncertainty surrounding trade talks between China and the United States hampering the complex. The SHFE base metals were split into two groups; nickel, tin and zinc prices declined, albeit the latter only marginally, while the rest of the complex ticked higher.  Copper managed to secure slight gains but struggled against a stronger dollar, lingering trade uncertainty and rising refined metal stocks in China’s domestic market.

The most-traded March copper contract on the SHFE stood at 48,320 yuan ($7,125) per tonne as at 10.27am Shanghai time, up by 130 yuan per tonne or 0.3% from the close on Monday.

“Liquidity returned to commodity markets as Chinese traders returned from a week-long holiday. However, sentiment was weak with a stronger USD and concerns about the US-China trade talks pushing most commodities lower,” Kishti Sen, international economist at Australia and New Zealand Banking Group (ANZ), said in a morning note.

Though little changed at 97.03 as at 10.30am Shanghai time, the dollar index is hovering highs last seen in late December 2018.

“The US dollar continued to gently strengthen with GBP and EUR both suffering as poor data weighs on both,” Jeffrey Halley, senior market analyst from foreign exchange company Oanda, said in a morning note.

Wider concerns surrounding US-China trade talks and a fresh government shutdown in the US are also adding to the risk-off tone in commodity markets this morning.

“Market confidence continues to be tempered by pessimism, firstly on whether US Democrats and Republicans can reach an agreement before Friday to avert another government shutdown and secondly around US-China trade talks ahead of heavier tariffs kicking in at the end of the month,” ANZ’s Sen said.

From a fundamental perspective, copper is also contending with rising stocks of refined metal in China. But copper concentrate in the country is in relatively tight supply which should offset some of this pressure from rising supply of refined material, market participants said.

Fastmarkets MB assessed Shanghai-bonded copper stocks at 441,000-446,000 tonnes in January, up by 4% from 423,000-428,000 tonnes in December 2018. January’s copper volumes are 16% higher than the 2018 low of 381,000-386,000 tonnes on October 22.

Copper stocks at SHFE-approved warehouses increased by 19.2% or 23,000 tonnes to 142,727 tonnes in the week to February 1.

Yet declining copper concentrate treatment and refining charges (TC/RCs), discounts on exchange prices paid to smelters for the costs of processing concentrates into refined metal, are indicative of tightening concentrate supply.

Copper concentrate TC/RCs fell at the end of January with smelters in China breaking away from the quarterly procurement price floor amid an outlook for a tightening in supply later this year.

Fastmarkets MB’s copper concentrate Asia-Pacific TC import index fell to $79 per tonne/7.9 cents per lb on Thursday January 31, the lowest since mid-June, when the index was recorded at $77 per tonne/7.7 cents per lb.