LIVE FUTURES REPORT 16/05: Positive trade headlines buoy SHFE base metals prices; Ni up 0.5%

Base metals prices on the Shanghai Futures Exchange exhibited broad-based strength for a second day in a row during morning trading on Thursday May 16, with nickel once again leading the charge higher – though gains were more tempered in the alloying metal compared with Wednesday.

The most-traded July nickel contract on the SHFE stood at 97,710 yuan ($14,209) per tonne as at 9.46am Shanghai time on Thursday, up by 0.5% or 480 yuan per tonne from Wednesday’s close of 97,230 yuan per tonne.

The rest of the complex recorded more marginal gains with copper and tin little changed, while the others were up by between 0.1% for lead and aluminium and 0.4% for zinc.

The SHFE base metals were supported by a return of risk appetite among investors amid news that the United States was attempting to ease trade tension with some trading partners.

“Risk appetite quickly turned around on news of easing negotiations on US car tariffs with the EU and US metals tariffs with Canada and Mexico,” Kishti Sen, an analyst at Australia and New Zealand Banking Group (ANZ), said in a morning note.

“Commodity markets were broadly higher despite weak economic data and ongoing trade US-China trade negotiations,” Sen added, referring to softer than expected Chinese and US data released on Wednesday morning – see other highlights below.

But heightening US-China trade tensions continued to weigh on sentiment after the US Commerce Department added Chinese telecom giant Huawei to its so-called “Entity List”, which bans the former from buying parts and components from US companies without US government approval.

This has limited the gains seen in the SHFE base metals so far on Thursday.

Nickel, this morning’s outperformer, seems to be benefitting from a healthier fundamental picture.

“In terms of spot trading [for nickel], there has been more enthusiasm in downstream purchasing,” an analyst with Chinese broker Citic Futures said in a morning report.

Low levels of on-exchange stocks are also supportive for the alloying metal.

Nickel stocks in London Metal Exchange warehouses totaled 167,268 tonnes on Wednesday, a fresh six-year low. Stocks in SHFE-listed warehouses totaled 9,123 tonnes on May 10, which is down by 38.7% from 14,881 tonnes at the start of the year.

Other highlights

  • The dollar index inched down 0.02% to 97.53 as at 9.46am Shanghai time. This compares with a recent low of 97.03 reached on Monday.
  • The Shanghai Composite Index rose by 0.49% to 2,953.18 as at 10.45 am Shanghai time.
  • In Chinese data on Wednesday, fixed asset investment grew by 6.1% in the January-April period from a year earlier, down from growth of 6.3% in the first quarter of the year. Industrial output expanded by 5.4% in April, down significantly from the 8.5% growth recorded in the prior month. Chinese retail sales were similarly poor last month with a year-on-year increase of 7.2% compared with the prior’s month gain of 8.7%.
  • This was followed by soft data from the US which saw retail sales fall unexpectedly in April with a decline of 0.2% after March’s 1.7% surge. Other US releases were similarly soft with industrial production dropping by 0.5% in April versus a 0.2% gain in the prior month and the capacity utilization rate slipping to 77.9% from a downwardly revised 78.5% previously.
  • US data of note on Thursday includes building permits, the Philadelphia Fed manufacturing index, housing starts and unemployment claims.
  • In addition, US Federal Open Market Committee member Lael Brainard and UK Monetary Policy Committee member Jonathan Haskel are due to speak.