LIVE FUTURES REPORT 12/06: SHFE base metals prices fall as trade optimism fades; Ni up 0.7%

Base metals prices on the Shanghai Futures Exchange were broadly down during morning trading on Wednesday June 12, with waning trade optimism and lackluster Chinese economic data causing most of the complex to retreat.

The weaker showing by the SHFE base metals this morning comes after US President Donald Trump accused Chinese officials of reneging on promises made at earlier trade negotiations, adding that he will not proceed with a new trade talks with China unless Beijing agrees to terms negotiated earlier in the year.

The comments reignited fears of a protracted trade conflict between the two countries, dampening the positivity that had emerged in markets earlier in the week.

Adding to the less friendly backdrop for the base metals was the release of lackluster data from China on Wednesday morning.

China’s consumer price index (CPI) and producer price index (PPI) rose by 2.7% and 0.6% respectively in May.

Though both releases were in line with forecasts, the PPI was down from a prior reading of 0.9%, which served to renew fears of a slowing Chinese economy amidst its trade war with the US, a Shanghai-based analyst said.

Market participants are now awaiting developments at the Group of Twenty (G20) Summit in Japan at the end of the month, at which Trump and Chinese President Xi Jinping are expected to meet, the analyst added.

The lone exception to the broad-based weakness exhibited by the SHFE base metals this morning was nickel, which seems to have found support from possible supply disruptions arising from flooding across the Indonesian island of Sulawesi.

The most-traded July nickel contract rose to 97,930 yuan ($14,160) per tonne as at 10.28am Shanghai time, up by 680 yuan per tonne, or 0.7%, from Tuesday’s close of 97,250 yuan per tonne.

“Nickel ore and nickel pig iron exports faces disruptions in the short term following flooding in Sulawesi, Indonesia,” Fastmarkets MB analyst James Moore said.

Indonesia is a major source of laterite ore and NPI for China; the latter imported 2.74 million tonnes of laterite ore in March this year, up by 27% from February. Of this, material from Indonesia accounted for approximately 60% or 1.65 million tonnes, an increase of 37% month on month to, according to China’s Bureau of Statistics.

China imported 97,000 tonnes of ferro-nickel and NPI in March, down by 31.5% month on month. Imports from Indonesia made up around 55.6% of China’s total imports at 54,000 tonnes, down by 45.8% month on month, data from the bureau showed.

Other highlights

  • The most-traded July copper contract stood at 46,840 yuan per tonne as at 10:28 Shanghai time, down by 230 yuan or 0.5% compared with the previous close.
  • The dollar index was little changed at 96.70 as at 10.41 am Shanghai time.
  • The Shanghai Composite Index was down by 0.57% at 2,909.07 as at 11.30 am Shanghai time.
  • In European data on Tuesday, the EU’s Sentix investor confidence reading fell to -3.3 in June from 5.3 in May and the UK’s average earnings index ticked up by 3.1% year on year in February-April – better than the 2.9% increase that had been forecast.
  • In US data on Tuesday, the PPI rose by 0.1% in May from the prior month, in line with expectations, while the IBD/TIPP economic optimism index fell to 53.2 in June from 58.6 in the prior month.
  • US data of note due on Wednesday includes the CPI, crude oil inventories and the Federal budget balance.