LIVE FUTURES REPORT 04/01: SHFE copper prices slump on macroeconomic concerns; nickel finds support

The most-traded March copper contract price on the SHFE fell to 46,590 yuan ($6,777) per tonne as at 10.18am Shanghai time, down by 720 yuan per tonne from Thursday’s close.

In US data overnight, the Institute for Supply Management (ISM) manufacturing purchasing managers’ index (PMI) fell to its lowest level in more than two years at 54.1 in December, down from 59.3 previously. ISM manufacturing prices were similarly weak at 54.9 last month, down from 60.7 in November.

The weaker-than-expected data sparked a decline in US stock markets overnight, with the Dow Jones Industrial Average plunging 2.8% to close at 22,686.22, the Nasdaq Composite fell 3% to close at 6,463.50 and the S&P 500 declined 2.5% to end the day at 2,447.89.

This weakness in western markets has filtered through to Asian stock markets this morning, as well as sending bearishness through broader markets, including those for the base metals.

Adding further downward pressure to copper prices is the expectation of a ramp-up in production of the metal this year.

“The new capacities and resultant new output seen during the second half of last year will have tremendous impact on the overall production in 2019, which as a result will put a great amount of pressure on copper prices,” Citic Futures Research said on Thursday.

Meanwhile, nickel prices have found support from a steadier stainless steel market in China and declining on-exchange inventories.

The most-traded May contract price rose 640 yuan per tonne to 89,010 yuan per tonne as at 10.18am Shanghai time.

Following sharp price falls in November, Chinese stainless steel prices managed to maintain a generally steady footing in December against a backdrop of falling inventories. This has helped boost confidence across the stainless steel supply chain, including the nickel market.

Fastmarkets MB’s price assessment for benchmark 304 stainless cold-rolled coil in the major market of Wuxi was 14,200-14,800 yuan per tonne including value-added tax for the week ended Wednesday, unchanged from a week

Nickel stocks at SHFE-approved warehouses ended 2018 at 15,259 tonnes, down 68.8% from the 48,920 tonnes seen at the beginning of last year.

London Metal Exchange nickel stocks, meanwhile, remain near their 2018 low at 206,100 tonnes.

“[The] fundamental backdrop still looks fairly positive from the sizeable market deficit and falling global inventory level,” Fastmarkets’ analyst Andy Farida said.

Base metal prices

• The SHFE March copper contract price dropped by 720 yuan per tonne to 46,590 yuan per tonne.
• The SHFE February aluminium contract price ticked up by 70 yuan per tonne to 13,365 yuan per tonne.
• The SHFE February zinc contract price dipped by 95 yuan per tonne to 20,230 yuan per tonne.
• The SHFE February lead contract price fell by 245 yuan per tonne to 17,525 yuan per tonne.
• The SHFE May tin contract price inched down by 180 yuan per tonne to 144,020 yuan per tonne.
• The SHFE May nickel contract price rose by 640 yuan per tonne to 89,010 yuan per tonne.

Currency moves and data releases

• The dollar index was down by 0.11% to 96.22 as at 10.19am Shanghai time.
• In equities, the Shanghai Composite was up by 0.99% to 2,488.68 as at 11.05am Shanghai time.
• In European data on Thursday, M3 money supply growth in the eurozone decreased to 3.7% year on year in November 2018, down from 3.9% year on year in the prior month. The annual growth rate of private loans in the eurozone stood at 3.3% in November 2018, compared with 3.2% in the preceding month. The United Kingdom’s construction purchasing managers’ index (PMI) for December 2018 stood at 52.8, missing an expected reading of 52.9 and down from 53.9 previously.
• In US data on Thursday, in a preview of the December jobs report, the ADP non-farm employment change showed that the total number of people employed last month was 271,000 – more than the 179,000 that was expected. Unemployment claims for the week ended December 29 rose to 231,000, compared with 221,000 in the prior week. Challenger job cuts for December were 35.3% higher than the number of cuts announced in the same month of 2017.
• In data on Friday, China’s Caixin services PMI stood at 53.9, compared with an expected 52.9.
• Later there is a host of services PMI data out across Europe and the United States. Other data of note due on Friday includes the European Union’s consumer price index (CPI) flash estimate and producer price index (PPI), while the December jobs report from the United States will be of particular interest to market participants.
• In addition, US Federal Reserve chairman Jerome Powell is speaking at the American Economic Association’s annual meeting in Atlanta.