LIVE FUTURES REPORT 21/05: SHFE nickel falls, but market outlook positive amid strong fundamentals

The most-active July nickel contract on the SHFE traded at 108,530 yuan ($17,013) per tonne as at 10.29 am Shanghai time, down 1,710 yuan per tonne from Friday’s close. Around 504,080 lots of the contract have changed hands so far this morning.

The dollar index stood at 93.81 as of 11.53am Shanghai time, up 0.13% from last Friday’s close. The index remains near its highest since December 18, 2017.

But the outlook for nickel continues to be supported by firm demand from China’s improved stainless steel industry and persistent declines in inventories at both London Metal Exchange and SHFE warehouses.

SHFE nickel inventories decreased 6,334 tonnes to 33,000 tonnes over the past two weeks as at May 18. Meanwhile, nickel inventories on the London Metal Exchange have fallen continuously since early May. Overall LME nickel stocks were at 305,748 tonnes on May 18, down a net 9,114 tonnes since May 4.

In supply news, Vale, one of the world’s largest nickel producers, announced that it would scale back investment in projects in Canada and New Caledonia and is taking out about 150,000 tonnes of production for the next three years to protect its reserves.

Meanwhile, nickel has also be supported by growing positive sentiment around demand from electric vehicles, with predictions from last week’s LME Asia Week indicating promising growth in the near term.

Nickel demand from electric vehicles is expected to surge ten-fold to 350,000-500,000 tonnes by 2025 from 36,000 tonnes in 2018, Robert Morris, Vale’s executive vice president of sales and marketing for base metals, forecast.

The rest of the SHFE base metals, except for aluminium, were up during the morning session on Monday, supported by an easing of trade tensions after the United States and China were seen to have made some progress during their talks in Washington, US.

A joint Sino-US statement issued from the White House on May 19 stated that China will help support growth and employment in the US by increasing purchases of the US’ goods and services. It says both sides agreed on meaningful increases in US agriculture and energy exports, with the US to send a team to China to work out the details.

“China’s Vice Premier, Liu He, stated both countries agreed not to engage in a trade war and will stop imposing new tariffs on one another,” ANZ Research noted on Monday.

The renewed positivity surrounding the cooling in trade tensions between the world’s two largest economies were broadly supportive to base metals complex this morning.

Base metals prices

• The SHFE July zinc contract price rose 250 yuan per tonne to 23,975 yuan per tonne.
• The SHFE June lead contract price was up 105 yuan per tonne to 19,770 yuan per tonne.
• The SHFE July copper contract price was edged up 100 yuan per tonne to 51,390 yuan per tonne.
• The SHFE September tin contract price increased 780 yuan per tonne to 145,780 yuan per tonne.
• The SHFE July aluminium contract price was down 45 yuan per tonne to 14,795 yuan per tonne.

Currency moves and data releases

• The dollar index was up 0.15% to 93.84 as of 12.01 am Shanghai time.
• In other commodities, the Brent crude oil spot price increased 0.52% to $79.03 per barrel, and the Texas light sweet crude oil spot price was up 0.56% to $71.76 as of 10.33 am Shanghai time.
• In equities, the Shanghai Composite was up 0.77% to 3,217.93 as of 11.30 am Shanghai time.
• The economic agenda is fairly light today with data already out showing Japan’s trade balance for April stood at a surplus of 550 billion yen ($4.96 billion) against an expected surplus of 114.9 billion yen.
• Later we have a European Central Bank financial stability review and US Federal Open Market Committee (FOMC) member Raphael Bostic is speaking.
• Looking toward the rest of the week, investor focus will likely be on Wednesday’s release of Eurozone and US flash manufacturing and services purchasing managers’ index (PMI) data. Investors will also be keeping a close eye on the minutes from the FOMC’s May meeting as well as a speech from US Federal Reserve chair Jerome Powell – due Wednesday and Friday respectively.