LIVE FUTURES REPORT 03/01: Bearish sentiment continues to pressure SHFE base metals prices; nickel outperforms

China’s weaker-than-expected manufacturing purchasing managers’ index (PMI) readings have prompted concerns over the country’s overall economic performance for this year. As a result, many market participants have taken a risk-averse stance due to the bearish market sentiment, which in turn has resulted in a weaker performance by the base metals on Thursday.

Only nickel managed to buck the trend, recording some strong gains against a positive fundamental backdrop.

Earlier this week, data releases from China showed the country’s official manufacturing PMI fell to 49.4 in December, the lowest reading since March 2016, while its Caixin manufacturing hit a 19-month low of 49.7.

“The performance of the manufacturing industry shows that China is now undergoing intense downward pressure in economic development and this will undoubtedly put pressure on base metals market,” Guotai Junan Futures said on Thursday.

Amid the bearish market sentiment stemming from concerns over slower growth in China, the most-traded March copper contract on the SHFE fell to 47,240 yuan ($6,881) per tonne as at 9.41am Shanghai time, down by 0.8% or 380 yuan per tonne from Wednesday’s close.

Sending further downward pressure to the red metal’s price is an expected increase in the metal’s production.

China’s refined copper totaled 8.01 million tonnes in the first eleven months of 2018, a year-on-year increase of 15%, and the country’s total production is estimated at around 8.7 million tonnes in 2018, according to Citic Futures Research.

Nickel was the best performer on Thursday as it found support of the positive fundamentals with the metal’s most-traded May contract on the SHFE climbing to 87,990 yuan per tonne as at 9.41am Shanghai time, up by 2.0% or 1,710 yuan per tonne from Wednesday’s close.

The latest International Nickel Study Group (INSG) statistics pegged the global refined nickel market in a deficit of 118,700 tonnes over the January-October period in 2018, up from the 86,500 tonnes in the corresponding period of the previous year, indicating that nickel’s fundamental backdrop remains mildly positive.

“Providing further support to nickel’s price is the fact that the supply growth is slower than the market expectations,” Citic Futures Research said on Thursday.

Base metals prices

• The SHFE February aluminium contract dropped by 55 yuan per tonne to 13,340 yuan per tonne.
• The SHFE February lead contract fell by 235 yuan per tonne to 17,765 yuan per tonne.
• The SHFE May tin contract slipped by 210 yuan per tonne to 143,660 yuan per tonne.
• The SHFE February zinc contract edged down by 30 yuan per tonne to 20,410 yuan per tonne.

Currency moves and data releases

• The dollar index went down by 0.20% to 96.69 as of 09.41am Shanghai time.
• In equities, the Shanghai Composite was up by 0.30% to 2,472.68 as at 10.28am Shanghai time.
• In European data on Wednesday, the European Union’s final manufacturing PMI for December came in at 51.4, in line with both the previous and forecast readings. The United Kingdom’s manufacturing PMI for the same month came in at 54.2, beating an expected reading of 52.5.
• In US data on Wednesday, the final manufacturing PMI for December was 53.8, slightly below an expected reading of 53.9.
• In data on Thursday, there is M3 money supply and private loans data from the EU, the UK’s construction PMI and US releases that include Challenger job cuts, the ADP non-farm employment change, weekly unemployment claims, ISM manufacturing PMI and manufacturing prices and total vehicle sales.