LIVE FUTURES REPORT 12/12: Most SHFE base metals prices up on rising optimism, dollar weakness; Sn, Al drop

Base metals on the Shanghai Futures Exchange were broadly higher at the close of the morning session on Thursday December 12, with optimism over a recovery in Chinese demand and a weak US currency providing support to the complex.

“The mood in the base metals sector remains positive, with optimism over a recovery in Chinese demand helped by signs of progress from the US-China trade talks,” ANZ Research analyst David Plank said in a morning note.

“Reports continue to surface suggesting the new US will delay tariffs due to hit Chinese goods on 15 December,” he added.

Elsewhere, the United States Federal Open Market Committee (FOMC) left the Fed Funds rate unchanged at 1.5-1.75% on Wednesday, as was widely expected.

“The FOMC left the Fed Funds rate unchanged while the dots plot suggest a vast majority (13 out of 17) of members expect the policy rate to remain unchanged in 2020. Most members see higher rates as likely in 2021, with a further increase expected in 2022. There was little change in forecasts for economic growth, unemployment and inflation,” said Rodrigo Catril, currency strategist at National Australia Bank.

The dollar weakened following the FOMC’s rate decision and press conference and continues to do so this morning, providing broad support to the base metals.

The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was down by 0.08% at 97.04 as at 11.46 am Shanghai time. This compares with a reading of 97.49 at a similar time on Wednesday.

As it did on Wednesday, nickel led the gains across the SHFE complex during the morning session. The most-traded February nickel contract on the SHFE ended the morning session at 110,100 yuan ($15,637) per tonne, up by 2,110 yuan per tonne – or 2% – from Wednesday’s close of 107,990 per tonne.

This follows a strong performance by the London Metal Exchange three-month nickel price on Wednesday, when it closed up by more than $400 per tonne – or 3% – at a two-week high of $13,850 per tonne. The strength came despite sizable inflows of 28,000 tonnes into LME-registered warehouses across Europe, Asia and North America this week.

Gains across the rest of the complex were more subdued: the February copper contract rose by 0.5% to 49,230 yuan per tonne, the February zinc contract climbed by 1.2% to 18,070 yuan per tonne and the February lead contract increased by 0.9% to 15,040 yuan per tonne.

Aluminium and tin bucked the firmer showing exhibited by their peers to decline by 0.4% and 0.7% respectively.

Capital has started to flow out of aluminium now due to the slow season ahead of Chinese holidays in January, an aluminium analyst based in Shanghai said.

Other highlights

  • Thursday is a busy day for data with releases that include Germany’s final consumer price index, the European Union’s industrial production, the European Central Bank’s main refinancing rate decision and policy statement, and the US’ producer price indices.
  • In addition, the United Kingdom’s general election takes place on Thursday.