LIVE FUTURES REPORT 01/02: SHFE nickel prices continue to weaken; other base metals broadly lower

The most-traded SHFE May nickel contract price stood at 102,350 yuan ($16,249) per tonne as of 10.54 am Shanghai time, down by 270 yuan or 0.3% compared with the previous session’s closing price of 102,620 yuan per tonne.

China’s Caixin manufacturing purchasing managers’ index (PMI) for January came in at 51.5 earlier this morning, in line with expectations and flat with the previous month’s print.

“The mildly positive [Caixin reading] combined with China’s slightly lower than expected manufacturing PMI for January released on Wednesday are simply not enough to give support to base metals’ prices at these already elevated levels,” a senior nickel analyst based in Shanghai said.

On Wednesday, China’s manufacturing PMI for January was lower than expected with a reading of 51.3, - the index had been expected to dip to 51.5 from 51.6 in December.

“From a fundamental perspective, these higher nickel prices are struggling to filter through to the downstream stainless steel sector as Chinese stainless prices and demand are currently weak,” the nickel analyst added.

“Ferro-chrome and nickel prices have both risen rapidly over the past two weeks, while stainless steel prices have not followed in their footsteps,” a stainless steel raw materials trader said.

“Higher raw material prices squeeze the profit of producing stainless steel, causing producers to run at a loss. Therefore it is highly likely that stainless steel mills will undergo maintenance in February due to the Chinese Lunar New Year holiday,” the trader added.

“The bright future for nickel surrounding its prospects in the production of electric vehicle batteries is a little far off considering the metal’s current elevated prices, but there has been some support for nickel on the supply front. Norilsk Nickel’s full-year nickel production fell 8% year on year to 217,000 tonnes in 2017, which exceeded the market’s expectations,” a second nickel analyst noted.

Meanwhile, the wide losses on the London-Shanghai import arbitrage for nickel continues to deter buying interest from participants within the world’s largest nickel consuming country.

Other metals lower; lead bucks the trend

• The SHFE March copper contract price was down 120 yuan to 53,100 yuan per tonne
• The SHFE March Aluminum contract price decreased by 75 yuan to 14,365 yuan per tonne.
• The SHFE March zinc contract price decreased by 65 yuan to 26,715 yuan per tonne.
• The SHFE May tin contract price fell by 800 yuan to 149,350 yuan per tonne.
• The SHFE March lead contract price rose by 85 yuan to 19,485 yuan per tonne.

Currency moves and data releases

• The dollar index was up by 0.04% at 89.126 as of 11.09 am Shanghai time.
• In other commodities, the Brent crude oil spot price was up by 0.01% at $68.91 per barrel as of 11.12 am Shanghai time.
• In equities, the Shanghai Composite was down by 1.11% at 3,442.21 as of 11.30 am Shanghai time.
• In US data on Wednesday, in a preview of the Friday job’s report, the ADP non-farm employment change in January saw 234,000 Americans join the labor force, above the forecast of 186,000. Employment cost index during the fourth quarter also exceeded expectations at 0.6%. The Chicago PMI for January was better than expected at 65.7, but down from a previous print of 67.6, while crude oil inventories rose by 6.8 million barrels in the last week, compared with analysts’ expectations for an increase of 126,000 barrels. The increase followed 10 weeks of declines.
• In data today, China’s Caixin PMI was in line with expectations at 51.5.
• Later, we have manufacturing PMI data out across Europe and United States. Other US data of note due today includes Challenger job cuts, preliminary non-farm productivity and unit labor costs, unemployment claims and construction spending.