LIVE FUTURES REPORT 15/07: SHFE nickel prices rise 2.2% amid weaker dollar, supportive fundamental backdrop

Nickel was the outperformer of the SHFE complex, exhibiting similar strength to that of the London Metal Exchange’s three-month nickel price at the end of last week.

The most-traded August nickel contract on the SHFE rose to 106,150 yuan ($15,424) per tonne as at 9.27am Shanghai time, up by 2,310 yuan per tonne, or 2.2%, from Friday’s closing price of 103,840 yuan per tonne.

A softer US currency amid growing expectations of a cut in interest rates in the United States by the end of this month was broadly supportive to nickel prices – as well as the rest of the complex.

The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was at 96.83 as of 9.27am Shanghai time on Monday. This compares with a recent high of 97.59 on July 9.

“[Federal Reserve chairman] Jerome Powell was the biggest factor on the dollar’s decline by testifying twice [last week] in Washington about monetary policy,” Alfonso Esparza, senior market analyst from online trading services provider Oanda, said in a morning note.

“Powell kept up the dovish rhetoric and has the market fully pricing in a rate cut at the end of the month. The timing seems no longer in question, but the size of the cut is still open to speculation,” Esparza added.

Providing further support to nickel prices are concerns of possible supply disruptions.

“Nickel prices have been bolstered by further supply uncertainties following an earthquake in Indonesia near nickel-rich Sulawesi on [July 8], after the region was hit by flooding in June. Other disruptions have featured recently. Vale has suspended operations at Onca Puma following a court ruling and Glencore’s Koniambo complex in New Caledonia has been halted follow a leak of molten material,” Fastmarkets research analyst James Moore said.

Zinc and aluminium were also in positive territory during morning trading on Monday but to lesser extents with gains of 0.7% and 0.3% respectively.

Other highlights

• Copper (-0.1%), lead (-0.5%) and tin (-0.6%) all weakened during morning trading on Monday.
• In data on Friday, China’s trade balance, which tracks the monetary differential between a country’s net imports and exports over a period of time, increased a significant 23% year on year to 345 billion yuan.
• Meanwhile, imports into China dropped by 7.3% year on year in June, worse than market expectations of a 4.5% fall and follows a massive 8.5% drop in May. Exports from China in June came in at actual -1.3% against a previous 1.1% but slightly better than forecast -2%.
• The US producer price index (PPI) recorded a 0.1% month-on-month rise in line with forecast and previous value, while the country’s core PPI posted a month-on-month increase of 0.3%, beating expectations of 0.2%.
• In data already out on Monday, China’s fixed asset investment, industrial production and retail sales were all better than expected with year-on-year increases of 5.8%, 6.3% and 9.8% respectively in June.
• Later, the Empire State Manufacturing Index and a speech by US Federal Open Market Committee member John Williams are of note.