LIVE FUTURE REPORT 18/10: SHFE base metals broadly lower on profit-taking; nickel bucks the trend

The most-traded January nickel contract on the SHFE traded at 94,470 yuan ($14,281) per tonne as of 03:16 BST, up 1,070 yuan from yesterday’s close. Changing hands was at 320.272 lots and open interest of the contract was 404,280 positions, down 14,892 position from yesterday’s close.

Buoyed by near-term supply tightness and stable demand, positive fundamentals continue to put upward pressure on nickel prices.

“On the supply side, tightness due to production limitations on environmental grounds continue to lend support to the nickel price; […] meanwhile, the market sees stable demand from stainless steel mills whose profit margins have widened,” Citic Futures Research noted.

“[…] with the recent bullish developments in the Philippines and signs of strengthening in the physical market, we expect market players to raise bullish bets (ie, long positions),” Metal Bulletin analyst Boris Mikanikrezai said.

“Stainless mills and traders’ buying appetite will rise after having been cautious earlier,” Guotai Junan Futures said.

Inventories of nickel plate and ores have reached historical low levels recently. As a result, nickel premiums in Shanghai have moved steadily higher over the past few weeks and hit multi-year highs last week, although slight retreats have been witnessed this week.

Shanghai in-warehouse nickel premiums stood at $310-330 per tonne on October 17. Although slightly down from last week’s $330-350 per tonne, it was 42% from one month ago.

Metal Bulletin’s cif Shanghai nickel full-plate premiums were assessed $290-320 per tonne on October 17, up from $205-225 on September 19.

Copper price subdued on profit-taking

• The most-traded January SHFE copper contract price dropped to 55,090 yuan per tonne as of 03:16 BST, down 30 yuan per tonne from yesterday’s close.
• LME stocks increased a net 6,300 tonnes to 291,325 tonnes on October 17, with 7,150 tonnes freshly cancelled in various locations.
• Meanwhile, the LME three-month copper price fell $107.50 per tonne to 7,027 per tonne at yesterday’s close.
• “Base metals collapsed as the stronger USD ignited profit-taking amongst investors,” ANZ Research noted.
• The US dollar index made slight gains at close on October 17, climbing up to 93.498, though it retreated this morning.
• “The softening of zinc and lead price will also be likely to lead the copper price to fall,” Citic Futures Research said.
• “However, supply tightness still dominates the physical market,” Citic Futures added.
• The Shanghai cif copper premium has risen rapidly in recent weeks. It is assessed at $70 per tonne, compared to $59 approximately one month ago.
• On the supply side, Rio Tinto has slashed its mined copper production guidance for the second time this year due to a delayed ramp-up at the UK-listed miner’s Escondida operation as well as mine sequencing changes at Rio Tinto Kennecott.
• The new full-year 2017 guidance for mined copper is now 460,000-480,000 tonnes, compared with a previously revised guidance of 500,000-550,000 set in April this year.

Other base metals dive

• The SHFE December aluminium contract price fell 100 yuan to 16,250 yuan per tonne.
• The SHFE December zinc contract price dropped 345 yuan to 25,215 yuan per tonne.
• The SHFE December lead contract price lost 450 yuan to 19,640 yuan per tonne
• The SHFE January tin contract price edged down 760 yuan to 146,330 yuan per tonne.

Currency moves and data releases

• The US dollar index was recently at 93.44 on Wednesday, down 0.05% from yesterday’s close as of 03:16 BST.
• In other commodities, the Brent crude oil spot price rose 0.42% to $58.29 per barrel while the Texas light sweet crude oil spot price was up 0.14% to $52.12
• In equities, the Shanghai Composite Index moved up 0.19% to 3,378.4.
• In data, a flurry of UK and EU figures came out. Notably, the UK September consumer price index (CPI) rose 3.0% as expected, while producer prices increased 0.2%. Eurozone CPI was up 1.5%, while Germany’s ZEW economic sentiment index was 26.7, down from forecasts and the previous reading.
• In US data, industrial production rose 0.3% month-on-month; foreign bond investment came in at $11.5 billion, compared with -$0.5 billion in previous month.
• Today’s calendar is pretty light, with US housing starts, building permits figures coming out later.
• • China’s President Xi Jinping will give the opening speech at the 19th Communist Party Congress; ECB board members Mario Draghi, Peter Praet and Benoit Coeure are speaking in Frankfurt; the US Federal Reserve’s William Dudley and Robert Kaplan will also deliver speeches later today.