LIVE FUTURES REPORT 10/01: Mixed China data sinks most SHFE base metals prices; nickel outperforms

The most-traded March copper contract on the SHFE stood at 54,920 yuan ($8,422) per tonne as of 10.55am Shanghai time, down by 90 yuan from the previous session’s close.

China’s December CPI stood at 1.8%, according to data released by the country’s National Bureau of Statistics on Wednesday. The reading was marginally lower than an expected reading of 1.9%, while slightly up from a print of 1.7% in November.

For the whole of 2017, China’s CPI rose 1.6% year on year, exceeding the 1.5% growth seen in the first eleven months of the year, but was down from the 2% rise seen in 2016.

Meanwhile, China’s PPI grew 4.9% in December, slightly higher than the expected 4.8% increase, but significantly lower than November’s print of 5.8%.

“China’s CPI and PPI data shows mild inflation for 2017, while the market expects the Chinese government’s moderately tight monetary policy will continue to cap commodities’ prices,” a Shanghai-based macro-economic analyst noted.

Adding further downward pressure to the base metals complex is a firmer dollar.

The dollar index was down by 0.1% at 92.44 as of 11.51am Shanghai time. The currency continues to push away from a low of 91.75 on January 2, having reached as high as 92.64 on Tuesday.

Nickel outperforms

• The most-traded May nickel contract on the SHFE climbed 1.4% or 1,360 yuan to 100,740 yuan per tonne as of 10.55am Shanghai time.
• Historically low stocks, increased fees for material entering China since the beginning of the year and higher long-term contract premiums are said to be the main supportive factors.
• “Beijing is charging higher fees to import refined nickel into the country – with the government raising the tax to 2%, from 1% previously, effective January 1 2018” a Shanghai-based nickel analyst said.
• Shanghai-bonded nickel stocks fell to historic lows at the end of last year with traders looking to clear cargoes through customs before the tax increase came into effect.
• Metal Bulletin’s assessment of nickel stocks in Shanghai-bonded warehouses plunged to 28,000-34,000 tonnes at the end of December 2017, down by 22.5% month on month and 61.7% on an annual basis.
• Providing further support for nickel was the news that two trading companies had accepted Nornickel’s $300-per-tonne nickel premium for 2018 – with Chinese buyers noting that the premium is double that for 2017 when the long-term contract premium averaged $120-150.
• “The high offer on the long-term contract underpinned expectations for tightness in the refined nickel market to persist into 2018, which in turn has boosted prices,” the analyst added.

Most base metals weaker, except tin

• The SHFE March aluminum contract was down by 15 yuan to 15,060 yuan per tonne.
• The SHFE March zinc contract declined by 160 yuan to 26,190 yuan per tonne.
• The SHFE February lead contract fell by 130 yuan to 19,490 yuan per tonne.
• The SHFE May tin contract rose by 590 yuan to 100,740 yuan per tonne.

Currency moves and data releases

• The dollar index dipped by 0.1% to 92.44 as of 11.51 am Shanghai time.
• “The USD finally showed some mettle following the run of generally strong data over recent months,” ANZ Research noted on Wednesday.
• In equities, the Shanghai Composite Index was up by 0.35% to 3425.84 as of 11.30 am Shanghai time.
• In other commodities, the Brent crude oil spot price edged $0.01 higher to $69.15 per barrel as of 11.53 am Shanghai time and the Texas light sweet crude oil spot price increased by $0.11 to $63.44 per barrel.
• In data today, the UK’s manufacturing production, goods trade balance, and construction output and industrial production are of note, while US data out later includes import prices, final wholesale inventories and crude oil inventories.