Shanghai metals came under heavy selling pressure on Wednesday, with zinc, copper and lead down sharply as worries about a cash crunch in China were compounded by ShFE measures to curb a searing rally in steel. Yuan borrowing costs in Shanghai surged to a two-month high on tight liquidity in the market after the central bank pulled funds from the financial system, traders said.
That came as regulators have stepped up moves to cool a commodities rally that has seen coking coal, steel and zinc prices surge to multi-year highs this month, amid a wider crackdown by China on outbound investment as it tries to shore up its currency in the wake of the US election. The Shanghai bourse said on Monday that it would limit the size of positions taken by non-members in some steel rebar futures to 8,000 lots, the latest effort by one of China's top commodities exchanges to tame speculative trading and surging prices.
"Industrial metals slumped as signs that China continues to take steps to rein in speculation in futures markets prompted investors to liquidate positions," said ANZ in a report. ShFE zinc and lead plunged 7 percent, while ShFE nickel, tin slid more than 4 percent. Copper closed nearly 4 percent down. The rout in Shanghai dragged London Metal Exchange metals lower.