LIVE FUTURES REPORT 02/09: SHFE base metals prices mixed amid trade uncertainty; Ni climbs 4.8%

Base metals prices on the Shanghai Futures Exchange were mixed during the morning trading session on Monday September 2, with nickel, tin and aluminum securing gains while the rest weakened marginally.

The mixed moves come amid heightened risk aversion among investors due to trade uncertainty after the United States imposed a 15% tariff on $125 billion of Chinese goods on September 1 as scheduled, while China countered with additional tariffs of 5% and 10% on certain US goods on the same day.

“The commencement of the latest round of Trump tariffs on China will not be the main act today. The ongoing impact of the trade war on Asia and global growth though will be. The avalanche of tier one data and weather plus geopolitical turmoil ensures September volatility will begin as emotionally as August’s finished,” Jeffrey Halley, senior market analyst at online trading services provider Oanda, said in a morning note.

Zinc, giving the worst performance of its peers on the SHFE, had its most-traded October zinc contract fall to 18,590 yuan ($2,597) per tonne as at 10.17am Shanghai time, down by 155 yuan per tonne - or 0.8% - from Friday’s close of 18,745 yuan per tonne.

In nickel, prices have managed to shrug off the less-than-favorable backdrop to continue to rally. The most-traded November nickel contract stood at 136,960 yuan per tonne as at 10.17am Shanghai time, up by 6,210 yuan per tonne - or 4.8% - from Friday’s close of 130,690 yuan per tonne.

Nickel’s stronger performance relative to the rest of its complex follows similar strength exhibited by the London Metal Exchange’s three-month copper contract on Friday, when it soared by more than 8% during afternoon trading following reports that Indonesia would expedite a ban on nickel ore exports, previously scheduled to take effect in 2022.

“The new 2019 high on Friday August 30 marks a positive technical development in the nickel complex. The metal has managed to extend the bull run, which is very much defined by growing disruptions in its supply outlook in 2019. As such, this could tilt the nickel supply-demand balance this year and potentially expand its market deficit,” Andy Farida, analyst from Fastmarkets, said.

“The news of the ban of Indonesian nickel ore has pushed market sentiment higher and higher and the inertia of price’s strengthening will continue for a while in the short term. But the speculation associated with this news has overdrawn part of the increase early on so the intensity [of subsequent price increases] may gradually weaken,” an analyst with China-based brokerage Galaxy Futures said in a morning note.

“In terms of supply, the marginal supply surplus in [China’s] domestic market is expected to reverse amid tight supply in September due to a continuously closed nickel import arbitrage window,” the analyst added.

Falling stocks were another supportive factor for the increase in nickel prices this morning; deliverable nickel stocks at SHFE-approved sheds totaled 25,262 tonnes on Friday after accounting for a 4,509-tonne outflow.

Other highlights

  • The US dollar index was up by 0.03%, at 98.85, at 10.17am Shanghai time.
  • The Shanghai Composite Index was up by 0.8%, at 2,909.63, as at 11.11am.
  • In US data on Friday, personal spending month on month for the August period was better than expected at 0.6%, while the core PCE price index over the same period came in below expectations with a 0.2% increase.
  • In data on Monday, China’s Caixin manufacturing purchasing managers’ index (PMI) at 50.4 in August, was better than the forecast reading of 49.8 and back in expansive territory.
  • There is a host of manufacturing PMI data out across Europe today while US markets are closed in observance of Labor Day.
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