LIVE FUTURES REPORT 07/11: SHFE base metals mostly prices down; nickel outperforms with 1% gain

Barring those for nickel and tin, base metals prices on the Shanghai Futures Exchange were all down during the morning trading session on Thursday November 7.

The broad-based weakness follows news that United States President Donald Trump and his Chinese counterpart Xi Jinping may not be able to sign a partial trade deal until December.

The two sides had initially been expected to meet at the Asia-Pacific Economic Cooperation (Apec) summit in Chile on November 16-17, but the summit was canceled amid widespread protests and riots in the country.

Still, there had been lingering optimism following reports that China was reviewing locations in the US where Xi would be willing to meet Trump to sign the first phase of a trade deal, with hope growing that an agreement could be reached this month.

But with a deal now looking unlikely until December and seemingly little progress made in negotiations, market sentiment has soured once more.

“One could take the view that by not committing to meet the original deadline for signing the so-called Phase 1 agreement (i.e. the since-cancelled Nov 17-18 Apec meeting) it gives more time for a somewhat more comprehensive agreement to be thrashed out – potentially involving a US commitment to wind back some existing tariffs,” National Australia Bank’s head of foreign exchange strategy Ray Attrill said in a morning note.

“But markets have understandably jumped the other way, exhibiting a slight loss of confidence that anything more substantial than an agreement not to further lift tariffs, in return for some increase in US agricultural purchases, can be agreed by way of an initial deal. The latter we would argue, was already fully priced into markets more than a week ago,” Attrill added.

As a result, the base metals traded on the SHFE gave a decidedly bearish performance during morning trading on Thursday, with losses in December copper (-0.2%), December aluminium (-0.3%), December zinc (-0.3%) and December lead (-0.1%).

Nickel and tin bucked the downtrend, however, with the former giving the best performance of its complex.

The most-traded December nickel contract on the SHFE was at 131,640 yuan ($18,782) per tonne as at 10.20am Shanghai time, up by 1,320 yuan per tonne – 1% – from Wednesday’s close of 130,320 yuan per tonne.

Nickel continues to benefit from positive fundamentals.

The International Nickel Study Group (INSG) pegged the refined nickel market in a 44,700-tonne deficit in the first eight months of 2019, suggesting tighter refined market conditions, which is consistent with the appreciation in nickel prices.

The INSG now forecasts a deficit of 84,000 tonnes for 2019, but this may need to be revised given the changing supply landscape following the decision by the Indonesian government to expedite its ban on exports of nickel ore.

Tin was the other outperformer, with its most-traded January contract up by 620 yuan per tonne or 0.5% to 137,220 yuan per tonne from its previous close of 136,600 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 0.06% at 98 as at 11.20am Shanghai time. The firmer US currency – up from 97.88 at a similar time on Wednesday – is also acting as a headwind for the base metals.
  • In data on Thursday, European Union economic forecasts, the Bank of England’s (BOE) monetary policy report, official bank rate vote, monetary policy summary, official bank rate and US unemployment claims are of note.
  • In addition, BOE Governor Mark Carney is speaking.