LIVE FUTURES REPORT 03/06: SHFE nickel slides 0.9% amid escalated trade tensions; Zn, Pb resilient

Base metals prices on the Shanghai Futures Exchange were mostly down during morning trading on Monday June 3 after investors’ appetite for commodity investment was dampened by a further escalation in trade tensions.

The SHFE base metals were split into two camps this morning with copper, aluminium, tin and nickel down between 0.1% and 0.9.%, while zinc and sister metal lead were up by 0.1% and 0.8% respectively.

Nickel led on the downside with the metal’s most-traded July contract declining to 97,380 yuan ($14,100) per tonne as at 9.27 am Shanghai time, down by 890 yuan per tonne from Friday’s close of 98,270 yuan per tonne.

“US President Donald Trump’s threats of escalating tariffs on Mexican goods, the release of weaker-than-expected manufacturing data from China and a barrage of potential counter-measures being considered by China in its trade war with the United States have all combined to heighten risk aversion among investors,” Andy Farida, Fastmarkets MB research analyst, said.

Furthermore, over the weekend, China released a government policy paper on trade issues with the US. The white paper suggested a willingness to return to negotiations, however it was also highly critical of the Trump administration’s tactics, blaming them for the talks falling apart, according to Edward Moya, senior market analyst at Oanda.

The nervousness of investors stemming from the further intensification of trade tensions has also filtered through to base metals sector as a result, putting downward pressure on prices.

The more pronounced weakness in nickel comes amid weakening fundamentals for the metal, with output – both mine and refined – considerably outstripping consumption, acting as a further headwind for prices, Farida said.

The International Nickel Study Group (INSG) states that global mine output remains strong, noting an increase of 8.2% in the first three months of 2019, mainly due to continued production ramps up by Chinese-funded Indonesian miners.

At the same time, the Chinese refined output rose by 11.8% in January-March this year, following annual growth of 14.2% in 2018, despite strict environmental inspections and one-off industrial accidents.

Other highlights

  • The dollar index was down by 0.08% at 97.68 as at 09.27am Shanghai time.
  • Lead outperformed its peers on the SHFE with the metal’s most-traded July contract climbing to 16,045 yuan per tonne as at 09.27 am Shanghai time, up by 120 yuan per tonne from Friday’s close of 15,925 yuan per tonne.
  • In data on Friday, China’s official manufacturing purchasing managers’ index (PMI) for May disappointed with a reading of 49.4, significantly lower than the forecast 49.9, and well below its prior reading of 50.1, showing that manufacturing activity actually contracted last month.
  • The US core personal consumption expenditure month on month for the May period was similarly recorded at 0.2%, but up from 0.1% the prior reading. Personal spending figures in the US over the same period fell to 0.3% from 1.1% previously.
  • Meanwhile, the Chicago PMI figures came in at 54.2, up from 52.6 previously, which is indicative of economic expansion.
  • In data on Monday, China’s Caixin manufacturing PMI for May came in at 50.2, flat with the prior month but beating an expected reading of 50.
  • Later, a basket of manufacturing PMI releases for May from the US, the UK and the Eurozone will be released.
  • In addition, US Federal Open Market Committee members Mary Daly and Randal Quarles are speaking.
  • US President Trump begins a state visit to the UK on Monday.