LIVE FUTURES REPORT 15/03: SHFE base metals prices mostly lower; lead bucks the trend

Base metals traded on the Shanghai Futures Exchange were broadly weaker during Asian morning trading on Thursday March 15, with heavy losses seen in nickel and zinc prices, while lead was the only metal to push higher.

Disappointing US data overnight and dovish speech from European Central Bank (ECB) President Mario Draghi has dented market optimism over the global growth outlook, prompting metals prices to drop this morning.

US retail sales fell unexpectedly in February - marking the third consecutive monthly decline. Overall sales fell 0.1% against an expected rise of 0.3%.

Meanwhile, the dovish tone struck by the ECB’s Draghi overnight also dampened the market’s upbeat view over global economic growth.

ECB President Draghi noted that recent gains the euro “weren’t all warranted by economic fundamentals.”

He also noted that the ECB is more confident on “inflation converging towards our aim over the medium term”, but that further evidence is needed. Accordingly, monetary policy “will remain patient, persistent and prudent.”

Zinc and nickel fared the worst of the SHFE base metals complex, with the former being affected by large deliveries of the metal entering London Metal Exchange warehouses this month.

“Zinc is down on account of another 10,000-tonne increase in LME stock holdings. Zinc stocks have now jumped by nearly 60% since the beginning of the month,” INTL FCStone analyst Ed Meir said on Wednesday.

Meanwhile, nickel prices have come under pressure from growing concerns that stainless steel mills in China may halt production in the near term due to shrinking profit margins.

The most-traded July nickel contract on the SHFE stood at 104,160 yuan ($16,484) per tonne as of 10.58am Shanghai time, down by 0.7% or 690 yuan per tonne compared with Wednesday’s close.

“With prices for stainless steel raw materials like nickel and ferro-chrome both up recently, the cost to produce stainless steel has risen, shrinking mills profits. This may push stainless steel mills to halt production,” according to China’s Galaxy Futures.

“Investors should now be paying attention to the lower levels of refined nickel stocks on the LME as well as the higher stainless steel stocks that have accumulated in the Chinese market. These two stock levels are the main indicators to keep an eye on for determining which way [nickel] prices will trend,” Galaxy Futures added.

The increased stainless steel production during the first quarter of 2018 - particularly from Indonesia - has also added to the headwinds facing the Chinese domestic stainless steel industry, according to analysts with Macquarie.

Other metals lower; lead bucks trend
  • The SHFE May copper contract was down by 70 yuan at 52,260 yuan per tonne.
  • The SHFE May aluminium contract was unchanged at 13,960 yuan per tonne.
  • The SHFE May lead contract price increased by 135 yuan to 18,520 yuan per tonne.
  • “Lead rose sharply, after data showed a spike in cancelled [LME] warrants (orders to withdraw inventory from exchange warehouses) [on Wednesday],” ANZ Research noted.
  • The SHFE May zinc contract dropped by 375 yuan to 24,820 yuan per tonne.
  • The SHFE May tin contract fell by 620 yuan to 144,550 yuan per tonne.

Currency moves and data releases

  • The dollar index was down by 0.1% at 89.67 as of 11.17am Shanghai time.
  • In other commodities, the Brent crude oil spot price was up by 0.18% to $64.99 per barrel as of 11.05 am Shanghai time.
  • In equities, the Shanghai Composite was down by 0.04% to 3,290.08 as of 11.30am Shanghai time.
  • There is a host of US data due today including the Empire State Manufacturing Index, Philadelphia Fed Manufacturing Index, unemployment claims and import prices.

LME snapshot at 02.52am London time
Latest three-month LME Prices
  Price ($ per tonne)  Change since yesterday's close ($)
Copper 6,993 4.5
Aluminium 2,091 2
Lead 2,393 -11
Zinc 3,230.5 4.5
Tin 21,175 25
Nickel 13,800 -35

SHFE snapshot at 10.58am Shanghai time
Most-traded SHFE contracts
  Price (yuan per tonne)  Change since yesterday's close (yuan)
Copper 52260 -70
Aluminium 13960 0
Lead 18520 135
Zinc 24820 -375
Tin 144550 -620
Nickel 104,160 -690

Changjiang spot snapshot on March 15
  Range (yuan per tonne)  Change (yuan)
Copper  51,850-51,890 340
Aluminium 13,730-13,770 20
Zinc 24,760-25,560 -390
Lead 18,550-18,750 150
Tin  144,000-145,500 -500
Nickel  103,050-103,550 -500

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