LIVE FUTURES REPORT 13/03: SHFE base metals prices mostly lower; nickel retreats on weak stainless steel market

Zinc was the only metal to witness any gains, while nickel prices edged downward following their rally on Monday with negative sentiment stemming from a weaker downstream stainless steel market weighing on prices.

The most-traded July nickel contract on the SHFE stood at 104,050 yuan ($16,437) per tonne as of 02.54am London time, down by 0.06% or 60 yuan per tonne compared with Monday’s close.

“In China, stainless steel prices have struggled - some market participants have lowered their prices further to draw down their inventories. Weak demand and soft prices may weigh on [nickel prices] if Chinese apparent demand continues to soften in the months ahead,” Metal Bulletin analyst Andy Farida said.

“Stainless steel prices rose following the rally in nickel prices on [March 9] and Monday, but trading volumes still did not pick up. High stocks of stainless steel products remain a headwind for stainless steel prices in China,” Galaxy Futures noted on Tuesday.

“Over the last two weeks, some 300 series-producing stainless steel mills have claimed that they will cut production in March. But so far, the market hasn’t seen any actual cuts to production. The mills are maintaining a wait-and-see stance to see whether stainless steel prices can follow nickel prices higher,” Galaxy Futures added.

In an attempt to prevent further declines in prices, stainless steel mills have stated they would cut production, but prices are unlikely to move higher until they actually execute these cuts, analysts with Galaxy Futures concluded, advising that participants exercise caution over any further rallies in nickel prices.

Yet slight support for nickel prices can be found from declining London Metal Exchange stock levels.

Deliverable LME nickel stocks fell further 2,208 tonnes on Tuesday to 326,790 tonnes.

“Investors’ views on nickel prices are divided. The optimism surrounding the metal’s use in the battery industry as well as recent policies and declining stocks seem to be encouraging a rally in prices, while nickel’s main downstream sector, stainless steel, looks to be calling for a correction in the price of nickel. Therefore, traders are struggling to decide on how to proceed with this volatile metal,” a Shanghai-based hedge fund manager said.

Other metals lower; zinc bucks trend

• The SHFE May copper contract dipped by 130 yuan to 51,830 yuan per tonne.
• The SHFE May aluminium contract declined by 115 yuan to 13,950 yuan per tonne.
• The SHFE April lead contract price decreased by 265 yuan to 18,180 yuan per tonne.
• The SHFE May tin contract fell by 790 yuan to 146,180 yuan per tonne.
• The SHFE May zinc contract rose by 95 yuan to 25,080 yuan per tonne.

Currency moves and data releases

• The dollar index was up by 0.02% at 89.933 as of 11.30am Shanghai time.
• In other commodities, the Brent crude oil spot price was down by 0.16% to $64.78 per barrel as of 11.31am Shanghai time.
• In equities, the Shanghai Composite was down by 0.23% to 3,319.12 as of 11.30am Shanghai time.
• The economic agenda is relatively light today with focus falling to the release of the United States’ consumer price index (CPI). The UK’s annual budget release is also of note today.
• In addition, there is an Economic and Financial Affairs Council meeting.
• “CPI will be important for near-term dollar valuation with weaker wage growth reported Friday. Any weakness in price growth would see downside pressure on USD intensify,” ANZ Research said on Tuesday.
• Participants will also be looking ahead to Wednesday with major releases including Chinese industrial production, fixed asset investment, retail sales and foreign direct investment along with retail sales, producer price index (PPI) and crude oil inventories from the US.