LIVE FUTURES REPORT 25/01: SHFE base metals prices up across the board with nickel leading the charge

Base metals prices on the Shanghai Futures Exchange were stronger across the board during Asian morning trading on Thursday January 25, with nickel leading the gains amid weakness in the dollar and firm demand.

The most-traded May nickel contract on the SHFE surged to 103,780 yuan ($16,260) per tonne as at 9.51 am Shanghai time, up by 5,140 yuan from the previous session’s close.

The contract had reached as high as 104,480 yuan per tonne earlier this morning, which was its highest since May 2015.

Weakness in the dollar remains the key driver for the base metals complex.

The dollar index fell 0.2% to 89.1 as of 10:46 am Shanghai time. Earlier in the session it had dipped to as low as 89.05, its lowest since December 2014.

“[The dollar] was already on the ropes, but comments from US Treasury Secretary Mnuchin welcoming a lower dollar sent the greenback tumbling further,” ANZ Research said on Thursday.

“Not helping matters either, is the increasing tilt towards protectionism that could spread globally if the US steps up its retaliatory spate of actions,” INTL FCStone analyst Edward Meir said.

“For now, it seems that the commodity complex remains in a ‘buy the dip' kind of a mode, with the weaker dollar being the key upside driver,” Meir added.

In addition, healthier global economic data also helped buoy market sentiment after the weakness seen since the start of the week.

“Manufacturing activity in the US looks strong, with the PMI [purchasing manager’s index] rising to 55.5 in January, up from 55.1 in December. Quarterly results from Caterpillar also buoyed investors. Sales in Asia and [Latin America] rose by more than 50% each, while North America and [Europe, the Middle East and Africa] were up 23% and 37% respectively in Q4,” ANZ Research noted.

In nickel, strong seasonal demand has also helped underpin prices.

“[Chinese] stainless steel mills have urgent need to restock nickel plates ahead of the week-long Chinese New Year holiday which begins on February 15. Meanwhile, heavy snowfall has prompted steel mills to make their purchases earlier than usual,” Citic Futures Research said.

“In the fundamentals, demand from the stainless steel sector remains strong. World crude steel production increased 5.9% year on year in October, according to the International Stainless Steel Forum,” Metal Bulletin analyst Boris Mikanikrezai said.

Copper rebounds on weak dollar
  • The SHFE March copper contract price rose by 1,020 yuan to 53,750 yuan per tonne as of 9.51am Shanghai time.
  • “Despite a flow of nearly 30,000 tonnes of copper into [London Metal Exchange] sheds in Asia [on Tuesday], the weakening of the dollar was sufficient to attract the attention of investors,” Citic Futures Research said.
  • Meanwhile, the long-term picture for copper prices also seems positive.
  • “While a slowdown in China remains a risk to copper demand, emerging demand outside of China and supply-side uncertainty this year will keep prices well supported,” according to Robert Ryan from BCA Research.

Rest of complex stronger
  • The SHFE March aluminium contract price was up by 95 yuan to 14,735 yuan per tonne.
  • The SHFE March lead contract price edged 30 yuan higher to 19,605 yuan per tonne.
  • The SHFE March zinc contract price climbed 385 yuan to 26,260 yuan per tonne
  • The SHFE May tin contract price moved up 750 yuan to 147,350 yuan per tonne.

Currency moves and data releases
  • The dollar index was down by 0.2% at 89.1 as of 10:46am Shanghai time.
  • The 2017 downward trend in the US currency is continuing into 2018 with the index earlier reaching a low of 89.05 - its lowest since December 2014.
  • In other commodities, the Brent crude oil spot price was up by 0.23% to $70.85 per barrel as of 9.51am Shanghai time.
  • In equities, the Shanghai Composite was down by 0.45% to 3543.29 as of 10.45 am Shanghai time.
  • In data on Wednesday, the US flash manufacturing PMI came in at 55.5, while the flash services PMI undershot at 53.3. Existing home sales of 5.57 million was below the forecast print of 5.72 million.
  • Today we have CBI realized sales from the United Kingdom, the EU’s minimum bid rate and a European Central Bank conference. US data includes unemployment claims, goods trade balance, new home sales and the CB leading index.
  • In addition, day three of the World Economic Forum annual meeting in Davos, Switzerland, gets underway.

LME snapshot at 01.51am London time
Latest three-month LME Prices
  Price ($ per tonne)  Change since yesterday's close ($)
Copper 7,135 -15
Aluminium 2,242.50 -7.5
Lead 2,632 -8.5
Zinc 3,449.50 9.5
Tin 21,005 -85
Nickel 13,580 5
SHFE snapshot at 09.51am Shanghai time
Most traded SHFE contracts
  Price (yuan per tonne)  Change since yesterday's close (yuan)
Copper  53,750 1,020
Aluminium 14,735 95
Zinc 26,260 385
Lead 19,605 30
Tin  147,350 750
Nickel  103,780 5,140

Changjiang spot snapshot on January 25
  Range (yuan per tonne)  Change (yuan)
Copper  53,560 —53,580 970
Aluminium 14,550 — 14,590 140
Zinc 26,240 —27,040 150
Lead 19,500 —19,700 -100
Tin  146,000—147,500 1,000
Nickel  102,750 —103,150 4,400

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