LIVE FUTURES REPORT 16/01: SHFE base metals prices broadly up; lead softens

On Tuesday, China signaled its intent to introduce fresh stimulus measures in the near term to address the increasing downward pressure on its economy. The measures included lower value added tax rates for select industries and tax rebates for others.

The stimulus news eased concerns over a downswing in the world’s second-largest economy and helped to boost risk sentiment across commodities markets.

Base metals similarly have benefited from this renewed positivity this morning, with prices on the SHFE, barring those for lead and tin, up across the board.

Nickel led the complex higher with an increase of 1%. This morning’s strength following similar gains for the London Metal Exchange’s three-month nickel price on Tuesday; the three-month LME nickel price ended trading on Tuesday $285 per tonne higher at $11,675 per tonne.

The most-traded May nickel contract on the SHFE stood at 93,050 yuan ($13,757) per tonne as at 10.11am Shanghai time, up by 980 yuan per tonne from Tuesday’s close.

“Nickel led the sector higher, with investors betting that demand in China will be boosted by strong growth in the electric vehicle sector,” ANZ Research said in a morning note.

Copper, aluminium and zinc recorded more marginal gains during Asian morning trading on Wednesday, while lead continued its downward trend due to weak seasonal demand and the disappointing performance of automobile sales.

“Downstream indicators continue to weaken, particularly slowing momentum in vehicle sales. Global light vehicle sales declined by 6.9% year on year in December 2018, according to LMC Automotive. Global sales totaled 94.8 million vehicles in 2018, down 0.5% year on year as a result, their first annual contraction since 2009,” Fastmarkets analyst James Moore said.

In China, overall vehicle sales fell by 2.8% to 28.08 million units in 2018, from 28.88 million units in the prior year, according to data from the China Association of Automobile Manufacturers (CAAM). It was the first decline since 1990. China produced 27.81 million vehicles last year, down 4.2% from a year earlier.

Base metals prices

• The SHFE March copper contract edged up by 130 yuan per tonne to 47,130 yuan per tonne.
• The SHFE March aluminium contract increased by 10 yuan per tonne to 13,325 yuan per tonne.
• The SHFE March zinc contract moved up by 85 yuan per tonne to 20,600 yuan per tonne.
• The SHFE February lead contract slid by 85 yuan per tonne to 17,470 yuan per tonne.
• The SHFE May nickel contract increased by 980 yuan per tonne to 93,050 yuan per tonne.
• The SHFE May tin contract was down by 510 yuan to 148,180 yuan per tonne.

Currency moves and data releases

• The dollar index was up by 0.08% to 96.01 as at 10.09 am Shanghai time.
• In equities, the Shanghai Composite was down 0.06 % to 2,568.88 as at 11.30 am Shanghai time.
• On Tuesday, the UK parliament rejected Prime Minister Theresa May’s plan for the United Kingdom’s exit from the European Union (in the process known as Brexit).
• In US data on Tuesday, the headline and core producer price indices (PPI) fell by 0.2% and 0.1% respectively in December last year, the Empire State manufacturing index fell 7.6 points to 3.9 in January – the lowest reading in more than a year, while the IBD/TIPP Economic Optimism Index slipped to 52.3 in early January.
• In data on Wednesday, there is a host of releases from the UK that include the core and headline consumer price indices, PPI input and output, retail price index and house prices.
• US releases due on Wednesday include monthly import prices, the National Association of Home Builders’s housing market index, crude oil inventories and the Beige Book.
• In addition, Bank of England governor Mark Carney is speaking.