LIVE FUTURES REPORT 16/10: SHFE base metals prices mixed on lackluster China data; nickel leads on downside

Base metals prices on the Shanghai Futures Exchange were mixed during Asian morning trading on Tuesday October 16, with the complex in consolidation mode after lackluster China data failed to inspire much-needed confidence in the market.

Data released early on Tuesday showed China’s consumer price index (CPI) rose 2.5% year on year in September, flat with expectations but up slightly from the 2.3% year on year gain seen in August.

The country’s producer price index (PPI) increased by 3.6% in September from a year earlier, slowing from the previous month’s 4.1% gain and just below a forecast increase of 3.7%. This marked the third consecutive monthly decline in producer price inflation – an indication of slowing economic momentum in the country amid continued trade tensions with the United States.

Concerns that the persisting trade spat between the world’s two largest economies will have a negative impact on economic growth and thus demand for metal has seen investors become more cautious, reflected in the relatively modest volumes traded so far this morning.

The SHFE base metals were split into two camps during morning trading on Tuesday, with copper, zinc and nickel declining, while the rest ticked upward.

The most-traded November copper contract on the SHFE stood at 50,420 yuan ($7,286) per tonne as at 10.50am Shanghai time, down by 150 yuan per tonne from Monday’s close.

Rising copper imports but a lower than expected consumption growth rate were also weighing on copper prices on the SHFE, China-based broker Guotai Junan Futures said.

“Rising inventories of copper cathode have put pressure on cif Shanghai copper premiums, while wider availability of copper concentrate means that there is sufficient supply for Chinese smelters,” a copper trader based in China’s Shenzhen province told Fastmarkets MB.

“Chinese yuan-denominated copper cathode premiums, based on the SHFE’s front month copper contract, are falling, which suggests a slowdown in consumption of copper cathode. Growth in copper consumption has been slower than market expectations overall this year,” the trader added.

China’s unwrought copper and copper products imports in September increased by 24% month on month and 21% year on year to 521,000 tonnes, according to preliminary Chinese customs data released on October 12. The 521,000 tonnes of imports are the highest since March 2016.

China’s imports of copper ores and concentrates for the first nine months of 2018 soared year on year. Total imports for the January-September period stood at 14.991 million tonnes, up 19.5% versus the prior year, customs data showed.

“Downstream smelters are not actively purchasing, however. [They] are not willing to replenish their stocks,” Guotai Junan Futures said.

Nickel prices were down the most on the SHFE this morning, with the metal’s most-traded November contract falling 890 yuan per tonne to 103,700 yuan per tonne.

This despite the metal having a fairly robust fundamental backdrop, with the refined nickel market said to have been in a deficit of 96,500 tonnes in the first seven months of the year, according to data from the International Nickel Study Group. This is considerably higher than the 51,800-tonne deficit in the previous year.

Nickel stocks at London Metal Exchange-approved warehouses stood at 222,102 tonnes on Monday, down 40% from the end of last year.

“We maintain a semi-bullish view of the nickel market. Recent Chinese economic policies should help quell previous worries that the Chinese economy is on a rapid slowdown. The implementation of extra stimulus should support the domestic housing market as well as large-scale infrastructure projects. As such, these policies are growth-inducing and potentially have a positive impact on stainless steel demand in the coming months and nickel as well,” Fastmarkets MB analyst Andy Farida said.

Base metals prices

  • The SHFE November nickel contract was down 890 yuan per tonne to 103,700 yuan per tonne.
  • The SHFE November zinc contract dropped 185 yuan per tonne to 22,370 yuan per tonne.
  • The SHFE November lead contract increased 35 yuan per tonne to 18,850 yuan per tonne.
  • The SHFE January tin contract was up 640 yuan per tonne to 147,530 yuan per tonne.
  • The SHFE November copper contract fell 150 yuan per tonne to 50,420 yuan per tonne.
  • The SHFE December aluminium contract ticked up by 65 yuan per tonne to 14,245 yuan per tonne.

Currency moves and data releases

  • The dollar index was up by 0.09% to 95.14.
  • In other commodities, Brent crude oil was up by 0.39% to $81.03 per barrel.
  • In US data on Monday, retail sales disappointed with month-on-month increase of 0.1% in September, which was lower than an expected gain of 0.7% but flat with the previous month’s print. The Empire State Manufacturing Index rose two points to 21.1 in October, which was higher than the forecast reading of 20.4.
  • In data on Tuesday, China’s CPI rose 2.5% year on year in September, which was in line with expectations. The country’s PPI increased by 3.6% in September from a year earlier, slowing from the previous month’s 4.1% gain and below a forecast increase of 3.7%.
  • US data releases of note later today include capacity utilization rate and industrial production.

London Metal Exchange, base metals prices

Shanghai Futures Exchange, base metals prices

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