LIVE FUTURES REPORT 03/09: SHFE nickel price continues to rally with 7.4% gain, others mixed

Nickel once again outperformed the other base metals traded on the Shanghai Futures Exchange during morning trading on Tuesday September 3, with the alloying metal continuing to benefit from expectations of tightening supply following news that Indonesia will expedite a ban on nickel ore exports.

The most-traded November nickel contract climbed to 147,110 yuan ($20,519) per tonne as at 10.27am Shanghai time, up by 10,150 yuan - or 7.4% - from Monday’s close of 136,960 yuan per tonne.

This follows strength in the London Metal Exchange’s three-month nickel price on Monday, when it hit an intraday high of $18,850 per tonne before retreating to close just above $18,000 per tonne.

“With the Indonesian export ore ban coming in December, the rush to stockpile low-grade nickel ore will drive demand and LME nickel price action in the next few months,” Fastmarkets analyst Andy Farida said.

“This should be price supportive, especially in the current landscape where substitute nickel ore from the Philippines is not expected to increase or be able to help offset the loss of supplies from Indonesia. Concurrently, the low global inventory level, backwardation that has recently flared to triple digits and a net positive net long fund position are fueling the move higher for now,” he added.

These concerns about a lack of available imported nickel ore in China, a country heavily reliant on imports of the material, is causing a rush among participants to secure supply for next year, when the ban comes into effect.

“China imported about 240,000 tonnes of nickel in ore last year. With resources in the Philippines severely depleted compared to 2014 when Indonesia last banned exports, the ability of China to find other sources is limited. This saw traders scrambling to secure supply, with nickel prices surging to their highest in five years,” Daniel Been, analyst with ANZ Research, said in a morning note.

The other SHFE base metals were mixed during morning trading, with the most-traded October copper contract falling to 46,440 yuan per tonne as at 10.27am Shanghai time, down by 200 yuan per tonne – or 0.4% - from Monday’s close of 46,640 yuan per tonne.

Other highlights

  • The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was up by 0.2% at 10.27am Shanghai time, at 99.25.
  • The Shanghai Composite Index was down by 0.1%, at 2,923.18, as at 11.04am.
  • In data on Monday, the European Union’s final manufacturing purchasing managers’ index (PMI) was unchanged at 47 for August, in line with expectations, while the United Kingdom’s manufacturing PMI for the same month disappointed at 47.4 - below an expected reading of 48.
  • In US data today, the Institute for Supply Management manufacturing PMI and construction spending will be released.
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