LIVE FUTURES REPORT 11/02: SHFE nickel prices climb to four-month high on iron ore futures rally; other base metals mixed

The most-traded May nickel contract on the SHFE stood at 101,690 yuan ($15,073) per tonne as at 10.29am Shanghai time, up by 2,240 yuan per tonne or 2.3% from the close on February 1. The contract had earlier reached a high of 101,950 yuan per tonne – its highest level since October 26, 2018.

The strength in nickel comes amid a rally in iron ore futures on the Dalian Commodity Exchange, which saw the most-traded May iron ore contract on the DCE hit its daily upper limit at 652 yuan per tonne at the open – 5% higher than the close on February 1.

“Bulk commodity markets remained transfixed by the Vale dam disaster, with iron ore prices continuing to surge higher,” senior ANZ Research economist Cherelle Murphy said in a morning note.

“Nickel, the alloying metal, is mainly consumed by the stainless steel sector, so it is normal [that the metal’s prices] will track the performance of iron ore prices on the DCE or rebar prices on the SHFE,” a Shanghai-based senior nickel analyst said.

Iron ore prices were expected to rise on China’s return to the market on Monday, market participants told Fastmarkets MB last Friday, saying that prices would be supported by the announcement of a a series anticipated production cuts by Brazilian producer Vale SA after the rupture of one of its tailings dams on January 25.

Concerns about the security of ‘upstream’ iron ore tailings dams in the state of Minas Gerais have prompted the evacuation of residents from nearby communities, Brazil’s national mining agency ANM said last Friday.

Meanwhile, the rest of the base metals traded on the SHFE were mixed on Monday morning, with uncertainty ahead of a trade talks between China and the United States due to take place in Beijing later this week pressuring the complex.

This uncertainty was exacerbated by a series of bearish global economic growth forecasts.

International Monetary Fund managing director Christine Lagarde warned attendees of the World Government Summit in Dubai on February 10 of a global economic “storm” as growth undershoots expectations.

“The bottom-line — we see an economy that is growing more slowly than we had anticipated,” Lagarde said.

Lagarde cited what she called “four clouds” as the main factors undermining the global economy, including “trade tensions and tariff escalations, financial tightening, uncertainty related to [the] Brexit outcome and spillover impact and an accelerated slowdown of the Chinese economy”.

The comments come after the IMF last month lowered its global economic growth forecast for this year to 3.5% from 3.7%. It was the second time in three months that the IMF had lowered its growth forecast.

In light of such uncertainty in the market, the base metals exhibited mixed movements with lead, zinc and aluminium falling, copper little changed and tin tracking the stronger tone set by prices on the London Metal Exchange of late to rise 0.7%.

Base metals prices

• The SHFE March copper contract price increased by 20 yuan per tonne to 48,290 yuan per tonne.
• The SHFE March aluminium contract price fell by 145 yuan per tonne to 13,400 yuan per tonne.
• The SHFE March zinc contract price declined by 425 yuan per tonne to 21,970 yuan per tonne.
• The SHFE March lead contract price was down by 330 yuan per tonne to 17,045 yuan per tonne.
• The SHFE May tin contract price increased by 1,100 yuan per tonne to 150,050 yuan per tonne.
• The SHFE May nickel contract price increased by 2,240 yuan per tonne to 101,690 yuan per tonne.

Currency moves and data releases

• The dollar index was little changed at 96.65.
• Shanghai Composite index closed Monday’s morning trading session at 2639.96, up by 0.83%.
• In data last Friday, the German surplus widened to €19.4 billion in December 2018 from €18.4 billion in the prior month. French industrial production rose by 0.8% month on month in December 2018, while the Italian equivalent for the same month declined by 0.8%.
• There is a host of data from the United Kingdom scheduled for Monday including gross domestic product (GDP), manufacturing production, preliminary GDP, preliminary business investment, construction output, goods trade balance, index of services and industrial production.
• In addition, there are Eurogroup meetings throughout the day and US Federal Open Market Committee member Michelle Bowman is scheduled to speak at the Annual American Bankers Association Conference for Community Bankers in the US state of California.