LIVE FUTURES REPORT 04/06: SHFE copper prices climb on supply concerns; nickel supported by declining inventories

Copper prices on the Shanghai Futures Exchange rose during Asian morning trading on Monday June 4, benefiting from supply-side concerns, while the rest of the complex was little changed to stronger.

Tin bucked the trend as it was the only base metal on the SHFE to record a significant loss so far this morning.

The most-traded July copper contract price on the SHFE rose to 51,990 yuan ($8,098) per tonne as at 10.19am Shanghai time, up 510 yuan per tonne from last Friday’s close.

Red metal prices have been underpinned by fresh supply-side concerns from around the globe.

Last week, India’s Vedanta Resources confirmed its subsidiary Sterlite had been ordered to permanently shut its 400,000-tonne-per-year Tuticorin refined copper smelter.

“The suspension of Sterlite’s operations will result in the reduction of Chinese refined copper imports from India and consequently an imbalance of copper supply in the region,” Citic Futures Research said.

In addition, the market continues to focus on the ongoing labor contract talks at BHP’s Escondida copper mine in Chile.

The talks, which began last Friday, come a year after failed labor negotiations led to a 44-day strike, which only ended after mine workers invoked a legal provision allowing them to extend their existing contract by 18 months, until July 31, 2018.

Nickel was the second best performer during the early session on Monday, helped by persistent declines in inventory levels.

The most-traded July nickel contract price jumped 1,050 yuan to 117,160 yuan per tonne as at 10.19am Shanghai time.

The metal has recorded 19 straight days of inventory decline on the London Metal Exchange as of last Friday following disruptions to Chinese stainless steel supply due to environmental concerns, leaving total stocks at 287,646 tonnes on June 3, their lowest since June 2014.

Nickel stocks at SHFE-listed sheds fell 1,070 tonnes last week, declining to 31,216 tonnes as of June 1.

In addition, the metal continues to receive support from the optimism surrounding consumption from the electric vehicle (EV) sector.

“Carmakers including VW-owned Porsche and Toyota have signaled they will move away from diesel technology, while Swedish carmaker Volvo aims to produce only electric vehicles by 2019. As such, global consumption of nickel for EV batteries is likely to rise over the coming years,” Andy Farida, analyst at Metal Bulletin said.

Base metals prices
  • The SHFE July aluminium contract price dipped 5 yuan per tonne to 14,645 yuan per tonne.
  • The SHFE July zinc contract price inched 5 yuan per tonne higher to 24,265 yuan per tonne.
  • The SHFE July lead contract price gained 100 yuan per tonne to 19,940 yuan per tonne
  • The SHFE September tin contract price fell 550 yuan per tonne to 154,280 yuan per tonne.

Currency moves and data releases
  • The dollar index was down by 0.16% at 94.04 as at 10.17am Shanghai time.
  • In other commodities, the Brent crude oil spot price was up by 0.03% to $76.59 per barrel as at 10.17am Shanghai time.
  • In equities, the Shanghai Composite was up by 0.25% to 3082.57 as at 11.07 Shanghai time.
  • In data on Friday, US releases were broadly positive with total non-farm employment increasing 223,000 in May, following a revised 159,000 gain in April, and unemployment edging down to 3.8% from 3.9% previously. The unemployment rate now matches its lowest level in almost fifty years. US average hourly earnings also surprised to the upside with a gain of 0.3% from the prior month.
  • In addition, US manufacturing activity expanded faster than expected in May, with the ISM manufacturing purchasing managers’ index (PMI) jumping to 58.7 last month from 57.3 in April. ISM manufacturing prices were similarly strong at 79.5, compared with an expected print of 78.1.
  • In data today, there is the EU’s Sentix investor confidence and producer price index, the UK’s construction PMI and US factory orders of note.

LME snapshot at 03.17am London time
Latest three-month LME Prices
  Price
($ per tonne)
 Change since last Friday's close ($)
Copper 6,927.50 31.5
Aluminium 2,292.50 -12.5
Lead 2,450 6
Zinc 3,106 5
Tin 20,695 -55
Nickel 15,445 0
SHFE snapshot at 10.19am Shanghai time
Most-traded SHFE contracts
  Price
(yuan per tonne)
 Change since last Friday's close (yuan)
Copper  51,990 510
Aluminium 14,645 -5
Zinc 24,265 5
Lead 19,940 100
Tin  154,280 -550
Nickel  117,160 1,050

Changjiang spot snapshot on June 4
  Range
(yuan per tonne)
 Change (yuan)
Copper  51,860 — 51,900 580
Aluminium 14,510 —  14,550 30
Zinc 24,440 —25,440 -50
Lead 20,150 —20,350 0
Tin  150,000—153,000 -500
Nickel  117,450 —117,550 -50

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