LIVE FUTURES REPORT 13/08: Lingering supply concerns, steady demand push SHFE nickel price up over 2%

With the exception of nickel, base metals prices on the Shanghai Futures Exchange were little changed during morning trading on Tuesday August 13 after market participants’ appetite for commodity investment was dampened by continuing geopolitical and trade tensions.

“Hong Kong tensions took the limelight from trade tensions overnight, with a risk-off tone to markets as protestors in Hong Kong managed to close the airport to most flights, prompting Beijing to describe the protest actions as ‘terrorism’. Fear is rising that the economic damage to the region could be long-lasting, as it is far from clear how the escalating tension, now ten weeks old, is going to be resolved,” Catherine Birch, senior economist at ANZ Research, said in a morning note.

The broad risk-off tone stemming from the Hong Kong tensions prevented most base metals on the SHFE from exhibiting significant movements: October aluminium (unchanged), October zinc (+0.2%), September tin (+0.4%), October copper (-0.3%), September lead (-0.8%).

Nickel, however, managed to outperform its peers among the complex with the metal’s most-traded October contract rallying to 123,500 yuan ($17,489) per tonne as at 9.22am Shanghai time, up by 2,520 yuan, or 2.1%, from Monday’s close of 120,980 yuan per tonne.

The more pronounced strength in nickel this morning comes as the metal benefits from renewed supply concerns amid a possible decision by Indonesia to bring forward its export ban on nickel ore.

“Nickel prices rallied after an Indonesian minister indicated the country will bring forward a planned ban on exports of nickel ore. Coordinating Minister for Maritime Affairs, Luhut Pandjaitan, said, ‘we will expedite’ the ban when asked if it will be brought in before 2022,” Birch added.

Meanwhile, steady demand from the downstream stainless steel sector in China also provided strong support to nickel prices on the SHFE.

“Tsingshan’s buying spree [buoyed the nickel price] after market reports indicated that the company was short of nickel because stainless steel production did not fall, as market participants expected. It appears that other stainless steel mills in China were active buyers too while they brought their planned restocking activity forward earlier than market participants thought. Local market reports indicate that the order book for stainless steel among Chinese consumers remained strong in the second half of 2019,” Fastmarkets research analyst Andy Farida said.

Other highlights

  • The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was up by 0.07% at 97.48 as at 9.22am Shanghai time.
  • Leading on the downside was lead with the metal’s most-traded September contract falling to 16,760 yuan per tonne as at 9.22am Shanghai time, down by 140 yuan per tonne from Monday’s close of 16,900 yuan per tonne.
  • On Monday, Chinese monetary data for July was weak; Chinese banks extended 1.06 trillion yuan in net new loans last month, down from 1.66 trillion yuan in June, according to the data released by the People’s Bank of China.
  • In data on Tuesday, the year-to-date Foreign Direct Investment (FDI) in China recorded a year-on-year rise of 7.3%, beating the previous 7.2%, according to the latest data from the country’s National Bureau of Statistics.
  • Later, employment figures from the United Kingdom and a basket of US data including the Consumer Price Index (CPI), core CPI, and the National Federation of Independent Business (NFIB) small business index of note.