LIVE FUTURES REPORT 02/11: SHFE nickel prices continue rally; others broadly weaker

Nickel prices resumed their rally from the previous session with the metal’s most-traded contract on the SHFE reaching a more than two-year high.

The most-traded January nickel contract on SHFE stood at 100,880 yuan ($15,251) per tonne as of 02:54 GMT, up 1,540 yuan from the previous session’s close.

The contract had reached a high of 101,750 yuan per tonne earlier in the session – its highest since June 2015 – as prices continue to find support from the general bullish tone in the nickel market due to strong physical premiums in China and elsewhere as well as optimism surrounding electric vehicle (EV) battery demand.

Shanghai bonded in-warehouse nickel premiums are at historically high levels, standing at $300-320 per tonne on October 31 after reaching an all-time high of $330-350 per tonne on October 24, according to Metal Bulletin’s assessment.

“Nickel once again led the sector higher … after strong gains earlier this week. Investors, buoyed by comments from the LME week, continue to pile in,” ANZ Research noted.

“Futures on the Shanghai Futures Exchange were up by the exchange’s limit in trading late yesterday, while on the [London Metal Exchange] it hit $13,000 per tonne for the first time since June 2015,” it added.

However, INTL FCStone analyst Edward Meir warned that there are headwinds for the nickel market too.

“it is important to note that EV sales remain a modest percentage of the market. In addition, sales remain critically dependent on subsidies, practically the world over,” Meir said.

Another factor to consider in the EV battery market is that with any rise in input costs, nickel faces the threat of import substitution, demand miniaturization or even destruction, and in extreme cases a complete overhaul of the makeup of the battery, according to Meir.

High stocks in LME warehouses are yet another factor which could put downward pressure on nickel prices.

Nickel stocks in LME-listed warehouses stood at 381,444 tonnes at the start of business on November 1, which is “near the top of this year’s range,” according to Metal Bulletin analyst William Adams.

The US Federal Open Market Committee’s statement effectively provided the ‘all clear’ for a rise in US interest rates next month, according to ANZ Research, but market focus has now fallen to US President Donald Trump’s nomination of the next US Federal Reserve chair – with Fed governor Jerome Powell widely tipped to replace current Fed chair Janet Yellen.

The dollar has edged lower this morning with rising expectations that Trump will pick Powell, who is seen as more dovish on interest rates, putting pressure on the currency. The dollar index was at 94.51 as of 02:42 GMT on Thursday, compared with 94.67 at around the same time on Wednesday.

Base metals prices

• The SHFE December copper price declined by 300 yuan to 54,160 yuan per tonne
• The SHFE December aluminium price firmed by 45 yuan to 16,175 yuan per tonne.
• The SHFE December lead price decreased by 50 yuan to 18,665 yuan per tonne.
• The SHFE December zinc price weakened by 225 yuan to 25,900 yuan per tonne.
• The SHFE January tin price decreased by 20 yuan to 144,390 yuan per tonne.

Currency moves and data releases

• The dollar index was at 94.51 as of 02:42 GMT, this compares with 94.67 at around the same time on Wednesday.
• In other commodities, the Brent crude oil spot price rose by 0.13% to $60.55 per barrel and the Texas light sweet crude oil spot price rose by 0.04% to $54.28 per barrel.
• In US data on Wednesday, the final manufacturing purchasing managers’ index (PMI) came in at 54.6, above the forecast of 54.5, while the ISM PMI surprised to the downside with a reading of 58.7, compared with an estimated print of 59.5 ¬- though a reading above 50 still indicates growth.
• In a preview of the October jobs report, the ADP non-farm employment change stood at 235,000, better than the 202,000 estimate and above the previous reading of 110,000.
• Meanwhile, US crude oil inventories decreased by 2.4 million barrels during the past week, against an expected decline of 1.5 million barrels.
• The economic agenda is heavy today with manufacturing PMI data out across Europe, UK construction PMI, the Bank of England’s (BOE) monetary policy summary and official bank rate and US data that includes unemployment claims, preliminary non-farm productivity and preliminary unit labor costs.
• In addition, BOE governor Mark Carney and US Federal Open Market Committee member William Dudley are speaking.