Base metals prices on the Shanghai Futures Exchange exhibited mixed movements during Asian morning trading on Wednesday January 23, with the complex under pressure from increasing bearishness stemming from macroeconomic concerns.

Lingering concerns over China’s slowing economic growth and uncertainty surrounding US-China trade relations continue to dampen market sentiment this morning, leading to a deterioration in risk sentiment.

Recent headlines seem to suggest that trade talks between the United States and China are not heading in the right direction.

“The Trump administration reportedly turned down an offer for preparatory talks with China due to a lack of progress on certain issues. With the deadline for a deal fast approaching (1 March), the market is starting to get nervous,” ANZ Research said in a morning note.

US-China trade relations took a further hit after news emerged on Tuesday that the US will pursue the extradition of Meng Wanzhou, China’s Huawei Technologies chief financial officer – this yet another factor adding to concerns over relations between the world’s two largest economies.

Global risk aversion continued to rise overnight causing base metals prices to be generally weaker this morning, an analyst with Guotai Junan Futures said.

In the SHFE base metals, nickel posted the largest loss so far this morning with the metal’s most-traded May contract declining by 0.5% or 480 yuan ($71) per tonne to 93,560 yuan per tonne.

“Chinese spot interest has slowed considerably, traders report – most stainless steel mills have completed their restocking,” Fastmarkets analyst Andy Farida noted.

“With no support from Chinese physical buying in the next few weeks, nickel could face another test lower,” Farida added.

In terms of gains, zinc secured the largest increase during morning trading so far on Wednesday; the metal’s most-traded March contract climbed to 21,510 yuan per tonne as at 10:20 am Shanghai time, up by 1% or 210 yuan per tonne from Tuesday’s close.

Zinc continues to benefit from tightening supply fundamentals.

“Chinese zinc smelters are still reluctant to bring back on stream fully shuttered capacity while the [three-month London Metal Exchange] price remains depressed. The build-up in shuttered capacity has hit availability of refined metal – hence the low on-warrant stocks at SHFE-bonded warehouses. [Chinese information provider] Antaike estimates the deficit in the domestic refined market at around 9,000 tonnes in 2018,” Farida said.

Zinc stocks at SHFE-approved warehouses totaled 29,434 tonnes on January 18, down from 44,524 tonnes on November 2, 2018.