LIVE FUTURES REPORT 16/09: SHFE base metals prices mixed; Ni under pressure from stock inflows

Base metals prices on the Shanghai Futures Exchange were on divergent paths during morning trading on Monday September 16, with risk aversion among investors heightening following an attack on Saudi Arabian oil facilities over the weekend.

News on Saturday of a drone attack on Saudi Arabian state-owned oil producer Saudi Aramco’s oil production facilities at Abqaiq and Khurais in eastern Saudi Arabia has sparked fears of major disruption in world oil supplies, causing oil prices to soar.

Aramco announced that emergency crews had contained fires at its plants in Abqaiq and Khurais following the attack, but added that the incident had resulted in production suspension of 5.7 million tonnes of crude oil per day.

Oil prices surged in response; Brent crude oil futures were at $66.93 per barrel as at 9.58am Shanghai time, compared with $60.22 per barrel during late European afternoon trading on Friday.

In the base metals, prices gave a mixed performance while the complex contends with the ramp-up in tensions in the Middle East and growing expectations of a trade deal being struck between China and the United States.

“The possibility of a trade deal between the world’s two largest economies has boosted sentiment in the base metals markets,” analysts with ANZ Research said in a morning note.

“The copper price is most sensitive to macroeconomic changes, and this morning’s pick-up demonstrates a promising geopolitical outlook between China and US,” a Shanghai-based analyst said.

The most-traded November copper contract on the SHFE stood at 47,650 yuan ($6,730) per tonne as at 9.58am Shanghai time, up by 160 yuan per tonne – or 0.3% – from Friday’s close of 47,490 yuan per tonne.

Limited gains were also seen in the most-traded contracts for zinc (+0.1%) and lead (+0.2%), while the rest weakened – led by a 3.3% drop in the most-traded November nickel contract to 139,900 yuan per tonne.

“Nickel was the odd metal out as the market continues to contemplate the impact of Indonesia’s recent nickel export ban. This was heightened by data showing inventories on the [London Metal Exchange] gained 6.6% on Friday, the largest single day rise since August last year,” ANZ noted.

A fresh inflow of some 12,198 tonnes of nickel was delivered into predominantly European warehouses on Friday, with LME-registered warehouses in Vlissingen the recipient of some 10,000 tonnes, and Rotterdam another 1,000 tonnes.

“The rally in nickel prices over the past few months is mainly due to speculation surrounding the nickel laterite ore export ban in Indonesia, and it was finalized last month, so there’s not much of an incentive for prices to achieve higher levels,” a second Shanghai-based analyst said.

Other highlights

  • The US dollar index dipped by 0.1% to 98.13 as at 9.58am Shanghai time.
  • In US data on Friday, retail sales figures month on month for the August period were better than expected at a reading of 0.4%, while core retail sales figures – which exclude cars – over the same period were worse at a reading of 0.0%.
  • Chinese data out already on Monday disappointed with industrial production growth slowing to its weakest pace in more than 17 years, expanding by just 4.4% year on year in August. Chinese retail sales for the same period similarly disappointed with a year-on-year gain of 7.5% versus the expected 7.9% increase.
  • Later, the US’ Empire State Manufacturing Index is of note.